The use of credit is an essential part of how low-income households manage to smooth their consumption in the face of “double-whammy” combinations of income and expenditure shocks. The big push for microcredit in the past decade has led to an abundance of microfinance providers and other providers that offer standardized products.
In this video William Easterly Professor of Economics at New York University explains how the book ‘Portfolios of the Poor’ has given a more realistic human view at the life of poor people and how it changes the perspective on the “consumption smoothing” concept.
In this video, Richard Rosenberg, consultant to CGAP, talks about the value proposition of microfinance and how this relates to the price for financial services. He highlights the usage of loans for consumption purpose instead of income generation or investment, and also notes that the usage is much more varied.