The Cost of Fads in Development Practice: lessons lost

Here is a classic example of the lumpiness of development policies. In a competitive landscape, as product placement becomes increasingly difficult, development projects are often fully endorsed, or fully rejected, leaving little space to learn about their true potential. As microfinance hits the doldrums, the knee jerk reaction may be to dismiss it, as yet another fad gone bust. However, in the words of Ralph Waldo Emerson "Bad times have scientific value. These are occasions a good learner would not miss."

In that spirit, a new debate has emerged to discuss the relative merits of microfinance, reminding the development world that just like any development product, microfinance will require different periods of experimentation, fine-tuning, reshaping and perhaps even re-branding as we learn about its real potential. This could mean changing the groups microfinance targets, combining microcredit with different products, or developing new features that can minimize the probability of defaults. It seems like the problem microfinance came to solve has not gone away. We just need to keep experimenting with a different mix of tools until it does.

We will discuss this in more detail in Lent Term with a class on Credit in the Developing World but in the meantime, here is some food for thought!