How do the credit problems of poor people in the United States differ from those in developing countries?
A lot of the work in developing countries that’s attracted attention recently has to do with microcredit and group lending, which has been pretty successful in some countries. There have been some attempts at replicating similar experiments in the United States and other developed countries, and they don’t seem to work in developed countries. So that’s one important difference. One finding that has really been a big eye-opener for me is a chapter by Timothy Bates on equal-opportunity lending programs. Most of the time these programs don’t work well in two respects. First, they often don’t reach the people they’re intended to target. And second, when they do reach the people they’re intended to target, often these people start businesses that end up being unsuccessful. Often people who are approached to set up a business on very favorable lending terms may not have the skills to run a business. They may not have investment opportunities that are worth investing in. A better policy might
