A Potential Model for Islamic Microfinance III: Proof of Concept Experiments
I have been working closely with two graduate students, Mohamed El-Komi at UT-Dallas, and Adam Osman at Yale, on the first phases of testing the proposed model of microfinance with zero interest along the equilibrium path. Dean Karlan, of Yale, may become more involved in the project going forward, especially if we proceed to implementation of a field experiment and impact study -- something that he's worked on in other parts of the world.
We received funding from the Kelly Day Foundation at the James A. Baker III Institute for Public Policy, where I have recently begun to serve as a fellow, and started working late summer 2009. In Fall 2009, Mohamed, Adam, and I went to Cairo and began to assemble the local research team; and then Mohamed and Adam went with the research team and ran some pilot experiments in two villages north and south of Cairo (attempts to run pilot experiments in Manshiyat Nasser, a Cairo slum, were discouraged by the locals). In January 2010, they went back and ran extensive "experiments in the field" and we have just begun to analyze the data.
I have added Mohamed and Adam as blog authors. Over the coming days and weeks, we should be posting the model designs that we used (one Grameen-style, and one based on RoSCAs), and showing some basic data summaries and analysis. We also hope to post some of our discussions of potential implementations here. One discouraging point has been the bankers' lack of interest in microfinance (I met some high-level bankers in Egypt last summer, and their notion of microlending was L.E. 5,000 to L.E. 50,000 loans, approx. $1,000 to $10,000, on which they bragged that they make positive returns!). However, to implement the RoSCA design, we cannot simply partner with NGOs. The Post Office, which is the recipient of most micro and small deposits in the country, may be a better partner, but we'll have to wait and see.
At any rate, we shall soon begin a series of posts on the experiments, our thoughts about them, and possible next steps.