Spring 2011

Economics 100 01:

"My greatest challenge has been to change the mindset of people. Mindsets play strange tricks on us. We see things the way our minds have instructed our eyes to see."
                        Muhammad Yunus


Fast Track to Course Calendar


MWF 11-11:50
meets in 210 Skinner

Satya J. Gabriel
Professor of Economics
e-mail: sgabrielatmtholyoke.edu
FAX: 413-538-2323

Course Description:

This first year seminar explores the historical origins and economic impact of contemporary developments in microfinance institutions (MFIs) and microfinance operations within other institutional structures, including investment and commercial banks, insurance companies, and non-governmental organizations (NGOs). This course introduces students to concepts from finance, such as discounted cash flow analysis, capital budgeting, and risk analysis, and economics that may be applied to the analysis of microloans, microsavings, and microinsurance and the innovative ways of delivering these products to customers who have not been traditionally well-served by larger scale financial institutions.

Meets Social Sciences III-A requirement

Prereq. fy or permission of instructor; 4 credits

Course Objectives:


Spring 2011

  • Texts 
  • Gabriel, Hinckley, and Jawaid, Microfinance: The Way of Grassroots Finance, 2009, Wingate Books.
  • Cassidy, John, How Markets Fail, 2009.
  • Web Essays and Web Accessible Readings 
  • Grading policy 
  • Course grades will be based on a midterm, five essays, classroom discussion/participation, and a final examination. Any student who earns an "A" on the midterm, essays, and class participation will be exempt from taking the final examination.
  • Course calendar

    Jan. 31 Introduction to Microfinance: Concepts and Theory of Microfinance
    Read the introduction to Gabriel, Hinckley, and Jawaid, Microfinance: The Way of Grassroots Finance (henceforth referred to simply as GHJ

    Feb. 2-4 Peer Groups, Due Diligence, and Business Plans
    .Peer Groups: Why Gender Matters. and .Multiplying Microfinance. in GHJ
    Feb. 7 Overdetermination and Poverty Alleviation
    .The Need for a Broad-based Approach. in GHJ

    Feb. 9 The Time Value of Money Online essay will be provided on this topic.
    Feb. 11 Discussion of the Concept of Market Failure
    Feb. 14-18 Discussion of the nexus linking financial relationships, microenterprise development, and macroeconomic impacts. This will include a lengthy discussion of the processes that shape financial institutions, in general, and microfinance institutions, in particular.
    Feb. 21-23 In preparation for the first debate on February 25th, we will discuss the different theories on microfinance, pro and con.
    Feb. 25 First Debate
    Feb. 28 Second Debate
    March 2-4 Microfinance, Macroeconomics, and Economic Crises

    The first essay will be due on March 11th. The essay question is as follows: What is the relationship between microfinance, microenterprises, and poverty alleviation?
    March 7-11 Discussion of the role venture capital and, more broadly, the capital markets in advancing microfinance and microenterprise development.  Read the "Profiles" section of the microfinance text.
    March 11 First essay is due.
    March 21-25 The Microenterprise-Microfinance Heuristic

    Discussion of the Heuristic for linking microfinance, microenterprises, government, and other social institutions: This week's discussion relies heavily on the, as yet unpublished, theoretical work of Professor Gabriel and, therefore, will not require additional reading beyond the primary microfinance text. However, you should be ready to particpate in lengthy discussion of the relationship of value creation within microenterprises and the creation of mutual obligations via cash distributions from this created value.

    March 28-April 1 "The Microfinance Illusion" by Milford Bateman and Ha-Joon Chang
    Click on the Link to and Read "The Microfinance Promise by Morduch" and the "Reply to Jonathan Morduch" by Mark M. Pitt Please read the above article. Each class participant is expected to write three questions related to the material each of the articles for the class to discuss next week. If time permits, we will discuss all three articles during the week, starting with the Bateman and Chang article on Monday. In addition, I've asked Lamia critic of the Grameen Bank, to send us a pdf from her upcoming book. If I receive it in time, I will post it to Ella and/or send it to you as an email attachment. However, we would probably have to read Karim's pdf the following week. The questions we formulate on the readings for this week will form the basis for your next essay assignment, which will be due in mid-April. Your first essay assignment will be returned on Monday.
    April 4-8 On Monday, April 4, we will discuss Karlan and Mullainathan's "Rigidity in Microfinancing: Can One Size Fit All?" We explore alternative microfinancing arrangements and contracts with the objective of identifying where flexibility and innovation are necessary for microfinance to be successful. Continuing in this vein on Wednesday and Friday, we discuss the efforts of Grameen to expand the reach of its projects and to "scale up" microfinance. We'll read "Tapping the Financial Markets for Microfinance: Grameen Foundation USA's Promotion of this Emerging Trend" by Jennifer Meehan and . On Friday, we will also discuss the next week's debates (our second round of debates), which will be scheduled for Wednesday and Friday. Groups will chose the statement and position (pro or con) they will take in the debates.
    April 11-15 The Second Round of Debates will occur on Wednesday and Friday. On Monday, the second essay question will be posted and we will review and summarize the conclusions reached so far in the course, including the arguments in the papers read in the previous week.
    April 18-22 This Friday the second essay is due. No extensions will be granted, so plan for this well ahead of time and complete your essay on time. This week we will begin our discussion of the book by John Cassidy, How Markets Fail: The Logic of Economic Calamities and the relevance of Cassidy's arguments to the effectiveness of microfinance to the larger issue of poverty alleviation.
    April 25-29 This week we will return to the primary text on microfinance and discuss the various microfinance case studies in the text. What cases do you believe best epitomize the potential for microfinance to reduce poverty? What cases may actually indicate potential problems for microfinance achieving its social mission? The final essay will be due on Friday, April 29th. All students who have successfully completed the three essays with at least an A- and have earned equivalent grades (of A- or higher) in the debates will be exempted from taking a final examination in the course.
    May 2nd Review Session

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