Microfinance functions as 'saving down': the borrower receives $40 up front, spends it on consumption (food, education, medicine), then pays it off over time — reversing the normal 'save up then spend' pattern — and the group obligation and threat of shame/shunning provide the commitment device that makes repayment possible where saving alone is not.

definitionpending

Speaker

Michael Munger

Evidence Quote

so what people call this now is saving down instead of saving up I'm saving down... all they're doing is reversing what you and I think of as the normal pattern of things you save up and then you spend well they spend it and they save down

Source

Mike Munger on Microfinance, Savings, and Poverty 04/18/2011EconTalk
Created: 6/17/2026, 10:29:24 AM

My Notes

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