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Lecture 0520 - Lecture Risk Insurance and Development Part...

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5/20/10 Lecture: Risk, Insurance and Development Part 1: Risk Attitudes and Activity Choices Business Today o Quickly through Micro-Credit o Risk Aversion and insurance Readings for Today o Armendariz de Ahion & Morduch: “Microfinance: Where do We Stand?” o “Income Smoothing and Consumption Smoothing” Tuesday o “Poverty Traps and Index Based Risk Transfer Products” Problem Set 3 due in class next Tuesday (5/25) What is micro-credit? The provision of very small (micro) loans, typically less than $100 Loans made by institutions (informal lenders have always done this) Target clientele: o Poor : people below or near the poverty line o Excluded : those traditionally excluded from the formal credit market (banks) o Entrepreneurs : those who have small-scale (typically informal) businesses Loans typically made o w/o collateral o to women o to groups Micro-credit is just one part of micro-finance : o Includes other financial services to the poor o Savings, insurance, financial education Micro-Credit: Brief History Heterogeneous history from Asia, Africa, & Latin America Most commonly associated w/ Grameen Bank in Bangladesh o
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