HARVARD UNIVERSITY

JOHN F. KENNEDY SCHOOL OF GOVERNMENT

Cambridge, Massachusetts 02138

MICROFINANCE IN
THEORY AND PRACTICE

PED-328 SYLLABUS
Spring 2008

Monday and Wednesday

2:40 – 4:00
Starr

Guy Stuart
T-382, 496-1011
guy_stuart@harvard.edu

Course Assistant:

Course Objectives and Overview

Microfinance institutions (MFIs) provide financial services to the poor. Financial
services include credit, savings, and insurance. The definition of who is poor varies by
country and region, but large ly includes those who work within the informal economy in
developing countries. This course introduces students to the practices of MFIs in a
variety of different developing countries, including: India, Mexico, Bolivia, Samoa, and
Haiti. It identifies the wide varieties of practices and governance structures of these
organizations, and the issues they confront. The course focuses on two major issues: the
impact of microfinance on the well-being of clients and the problems confronting
managers of MFIs.

The course is taught through a mix of case discussion and lectures. Students who
complete this course will have analyzed the various reasons for the existence of MFIs,
and the challenges MFI managers face.
Audience
In addition to future MFI managers, the course is designed for future funders and policy-
makers in foundations, government and international agencies, and those wishing to
examine alternative forms of economic development.

Requirements
Class Participation – 25%
Your individual participation in class discussions will determine 25% of your final grade.
Class participation is essential to the course since much of what you learn will come
through conversations with your colleagues.

Written Assignment: Case Analyses or Term Project-- 75%

You have a choice based on your level of experience with microfinance:
• Those with limited or no experience with microfinance can choose to write two
case analyses, limited to 1,250 words. One of the case analyses will be based on
classes 1 through 6 and will be due at the start of class (35% of the grade). The
second case analysis will be on classes 7 through 11, and will be due at the start of
class (40% of the grade).
• Those with experience in microfinance can choose to write a term paper on a
topic of their choosing, subject to the approval of the instructor. You must submit
a topic proposal by Friday, April 4, submit a paper outline by Friday, April 18,
and submit the final paper by Monday, May 19.

Grading
Passing grades are assigned according to the following distribution:
A A- B+, B, B-
10% 30-50% 40-60%

Grades lower than B- are failing grades

Materials
All cases and all readings labeled (Packet) are in the course packet available at CMO.
All readings labeled (Online) are available through links on the Online Course Page
under Online Materials.

Please purchase Stuart Rutherford’s The Poor and their Money, Oxford University Press
through a bookstore (we are not able to order bulk copies), or use the copies on reserve at
the KSG library.
1 Tuesday March 18, 2008

Overview of Microfinance

Required Reading:
J. Ledgerwood, 2000, Microfinance Handbook: An Institutional and Financial
Perspective, pp. 93-106 (Packet)

(Selected) Web Links:

Microcredit Summit http://www.microcreditsummit.org/
http://www.microcreditsummit.org/declaration.htm
International Year of Microcredit http://www.yearofmicrocredit.org/
Women’s World Banking http://www.swwb.org/INDEX.HTM
World Council of Credit Unions http://www.woccu.org/
Accion International http://www.accion.org/default.asp
USAID Microfinance http://www.usaidmicro.org/default.asp
Grameen Bank http://www.grameen- info.org/
SKS, Hyderabad http://www.sksindia.com/
PlanetFinance http://www.planetfinance.org/
Microfinance Gateway http://www.microfinancegateway.org/
CGAP http://www.cgap.org/
Unitus http://www.unitus.com
Microcapital Institute http://www.microcapital.org/
Socialfunds.com http://www.socialfunds.com/ci/index.cgi
MFI Rating Fund http://www.mfirating.org/about/index.html
MixMarket http://www.mixmarket.org/

2 Thursday March 20, 2008

Commercial Microfinance

Case:
“A Commercial Bank Does Microfinance: The Case of Sogesol, Haiti” KSG Case #1657

Required Readings:
Liza Valenzuela “Getting the Recipe Right: The Experience and Challenges of
Commercial Bank Downscalers,” (2002) The Commercialization of Microfinance, Eds.
Rhyne, E. and D. Drake pp. 46 – 74 (Packet)
Armendáriz B. and J. Morduch (2005) “Why Intervene in Credit Markets?” The
Economics of Microfinance, Ch. 2 pp. 25-56 (Packet)
 Tuesday March 25, 2008

Thursday March 27, 2008

SPRING BREAK

3 Tuesday April 1, 2008

Cooperatives

Case:
“Women’s Thrift Cooperatives in Andhra Pradesh,” KSG Case # 1656.0

Required Readings:
Rutherford, S The Poor and their Money, 77-114
“Caste Embeddedness and Microfinance: Savings and Credit Cooperatives in Andhra
Pradesh, India” Kennedy School of Government Working Paper, September 2006
(Online)

4 Thursday April 3, 2007

Client Impact Studies

Required Readings:
Armendáriz B. and J. Morduch (2005) “Measuring Impacts” The Economics of
Microfinance, Ch. 8 pp. 199-229 (Packet)
Navajas, S. et al. (2002) “Microcredit and the Poorest of the Poor: Theory and Evidence
from Bolivia,” The Triangle of Microfinance eds. Zeller, M. and R. Meyer pp.152-171
(Packet)
Hulme, D. (2000). "Impact assessment methodologies for microfinance: Theory,
experience and better practice." World Development 28(1): 79-98. (Online)

5 Tuesday April 8, 2008

Effective Interest Rates

Exercise:
Effective Interest Rate Excel Spreadsheet Problems Sets – available on course web site

Required Readings:
CGAP (1996) “Microcredit Interest Rates” Occasional Paper No. 1. (Online)
6 Thursday April 10, 2008

Strategic Issues in Microfinance I: Sustainability

No case
**Required Readings:
Morduch, J., (1999) "The role of subsidies in microfinance: evidence from the Grameen
Bank," Journal Of Development Economics (60)1, pp. 229-248 (Online)
Stuart, G. “Microfinance Sustainability and Public Value,” In Search of Public Value:
Beyond Private Choice, eds. John Bennington and Mark Moore, Palgrave MacMillan,
Forthcoming (Online)
Rosenberg, R. “Compartamos IPO: Microfinance Doing Good, or the Undoing of
Microfinance?” http://www.microcreditsummit.org/enews/2007-07_index.html (Online )

7 Tuesday April 15, 2008

Strategic Issues in Microfinance II: Going to Scale and Managing the “Last 100
Meters”

Exercise/Case:
ICICI – New case to be handed out

** Required Readings:
To be determined

8 Thursday April 17, 2008

Strategic Issues in Microfinance III: Opening New Markets

Case:
Corporate Values and Transformation: The Microlender Compartamos KSG Case
1761.0

** Required Readings:
Szulanski, G. (1996), “Exploring External Stickiness: Impediments to the Transfer of
Best Practice Within the Firm,” Strategic Management Journal, vol. 17, no.1: 27-43.
(Online )
9 Tuesday April 22, 2008

Strategic Issues in Microfinance IV: Gender

Case:
Microfinance and Social Entrepreneurship: South Pacific Business Development
Foundation, KSG Case 1804.0
The Social Construction of Gender: Microfinance and fa’afafines in Samoa, KSG Case
1805.0

Required Readings:
"Micro-credit Initiatives for Equitable and Sustainable Development: Who Pays?"
Rahman, A., World Development, Vol 27(1), 1999, 67-82 (Online)
Armendáriz B. and J. Morduch (2005) “Gender” The Economics of Microfinance, Ch. 7
pp. 179-197 (Packet)

10 Thursday April 24, 2008

Strategic Issues in Microfinance V: Finance Plus

Case:
Beyond Cooperation: Gender, Activism, and Self- Help in Maharashtra, KSG Case 1806

Required Readings:
Beyond Credit: A subsector approach to promoting women's enterprises, ed. Martha
Chen, pp. 1 - 33; 49 - 56; and 96 – 109 (Packet)
J. Ledgerwood, 2000, Microfinance Handbook: An Institutional and Financial
Perspective, pp. 33-46 (Packet)

11 Tuesday April 29, 2008

Strategic Issues in Microfinance VI: Housing Microfinance

**Required Readings:
Housing Microfinance Initiatives, USAID study, pp.1-28 and selected case studies;
http://www.mip.org/ (Online)

12 Thursday May 1, 2008

Wrap Up

FINAL PAPER DUE AT 5PM, MONDAY, MAY 19TH