Yale Wins Gates Foundation Grant To Explore Micro-Lending

Yale University has won a $7 million grant from the Gates Foundation to carry out research into micro-lending. As WNPR’s Harriet Jones reports, the university will partner with a non-profit group to look at the effects of small loans and other financial services in developing nations.

Micro-lending has grown in popularity in recent years, since it was pioneered by Mohammed Yunus and the Grameen Bank. In India alone, its estimated that there are more than $2 billion in loans outstanding. But it’s had its growing pains, and the sector is now troubled in places by predatory lending practices. Innovations for Poverty Action or IPA will partner with Yale University for this $7.3 million grant from the Bill and Melinda Gates Foundation. IPA’s Alexandra Kobishyn told WNPR’s Where We Live, the idea is to look beyond loans into other financial services such as savings and insurance.

“Microcredit doesn’t work the same way for everyone. I think the popular perception is that every poor person can be an entrepreneur, every poor person can take a small loan and jumpstart a business, or use it as working capital to expand a business. Our research shows that credit impacts households in different ways, and sometimes credit only, simply credit isn’t the answer for poor households.”

Microfinance is also a growing sector in the U.S. as more entrepreneurs look to nontraditional lending to start businesses of Elm Seed is run by Yale students to provide microloans to New Haven entrepreneurs. CEO Liz Bershad says in the U.S., planning and follow up services are crucial to the success of micro credit.

“Almost all of the microfinance institutions in the U.S. provide business training as well as consulting to make sure that all of their clients have a very solid business plan and to make sure that money is going into an investment that can make them really great returns.”

The Yale grant will fund research for four years, and look at the success of initiatives in four separate countries.

For WNPR, I'm Harriet Jones.