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>  News Releases >   2007 >   December

Economics lesson in the Philippines

Dartmouth College Office of Public Affairs • Press Release
Posted 12/10/07 • Susan Knapp • (603) 646-3661

Owen Zidar
Owen Zidar (photo by Joseph Mehling '69)

It was in an economics course that introduced Owen Zidar, a member of the Dartmouth class of 2008, to rural life in the Philippines. "Development Economics," taught by Associate Professor of Economics Eric Edmonds, focuses on the causes and consequences of persistent poverty around the world, and topics discussed often include child labor, HIV/AIDS, credit, and environmental degradation.

Because Zidar wanted to further pursue development research abroad, he contacted Innovations for Poverty Action, a non-profit organization that runs research projects around the globe that address problems faced by the poor in developing countries.

"Working with IPA, I had the chance to address two pressing issues regarding microcredit: its impact and its financial sustainability," Zidar says.

Microcredit programs, lending small amounts of money on a short term, sometimes high-interest-rate basis, are prevalent in some poor regions. They are touted as a means to establish better credit, launch a business, or simply survive in some cases. Zidar contributed to the nascent body of research surrounding the successes and shortcomings of these programs. With support from the Dean of the Faculty Office, through a Paul K. Richter and Evalyn E. Cook Richter Memorial Fund Research Grant, Zidar went to the Philippines.

"I met and surveyed many people associated with microcredit and had many interesting and unique experiences, ranging from traveling to remote villages to survey people about the availability of microcredit to meeting with the leaders of microcredit institutions," he says.

Zidar participated on a team that gathered data in the rural villages in Bohol to find out whether programs with group liability were more successful than those with individual liability, in terms of both lenders' profitability and the poor's access to credit. Group liability, a contract feature commonly used by microcredit institutions, makes a small group of borrowers accountable for each other's loans. To find the answer, Zidar's research team randomly selected half of 169 established group liability centers and converted them into individual liability centers. They then compared the two types of centers.

"Over the course of a year, there was no significant change in repayment between the two groups of centers," says Zidar, "But we did learn that there was higher client growth in the new centers of individual liability. But, because the borrowers in this test were all pre-screened by their peers through the original process of forming groups, more research needs to be done to see if new individual-liability center participants, who won't be peer selected, will have higher default rates."

Professor Edmonds says that Zidar is not only an exceptional student and scholar, he is also enthusiastic toward this project. "It's been great to see how he has taken his classroom interests and applied them to better understand the lives and decisions of some of the world's poor. His self motivation and intellectual curiosity have made him a real pleasure to know and work with," he says.

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