A lot of attention has been around the issue of interest rates charged by microfinance institutions. In his comment “Sacrificing Microcredit for Megaprofits” in the NYT Muhammad Yunus claims that with institutions such as SKS of India or Compartamos of Mexico going public, “microcredit would gave rise to its own breed of loan sharks.”

But what actually makes a lender a loan shark? The focus has been primarily on the interest rates charged. Yunus suggests a rule of thumb:

The maximum interest rate should not exceed the cost of the fund — meaning the cost that is incurred by the bank to procure the money to lend — plus 15 percent of the fund. That 15 percent goes to cover operational costs and contribute to profit. In the case of Grameen Bank, the cost of fund is 10 percent. So, the maximum interest rate could be 25 percent. However, we charge 20 percent to the borrowers. The ideal “spread” between the cost of the fund and the lending rate should be close to 10 percent.

This rule of thumb proves to be overly simplistic. It basically imposes a cost-target for lenders, suggesting that operational costs should be covered by a markup of 15% on the cost of raising funds. It has been noted that many institutions fall short of such a rule of thumb.

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The attached PDF contains a summary of the article

Banerjee, A., Duflo, E. (2003), Journal of Economic Growth, Vol , pp. 267-299.

Abstract
This paper describes the correlations between inequality and the growth rates in cross-country data. Using non-parametric methods, we show that the growth rate is an inverted U-shaped function of net changes in inequality: changes in inequality (in any direction) are associated with reduced growth in the next period. The estimated relationship is robust to variations in control variables and estimation methods. This inverted U-curve is consistent with a simple political economy model but it could also reflect the nature of measurement errors, and, in general, efforts to interpret this evidence causally run into difficult identification problems. We show that this non-linearity is sufficient to explain why previous estimates of the relationship between the level of inequality and growth are so different from one another.

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Nachdem ich das erste Jahr in London quasi in einem Wohnheim der LSE, nämlich der Carr-Saunders Hall unterkommen bin, hieß die erste Herausforderung für den PhD eine Wohnung oder genauer gesagt, ein Zimmer in London zu finden. Es sollte sich herausstellen, dass man auch manchmal einfach sehr viel Glück haben kann.

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Economics is not Mathematics, even though there is a lot of Math in it. Especially Calculus and Real Analysis are important for any serious student of economics and in that course you are likely going to get familiar with phrases like….

1. It is easy to see that…
2. Obviously…
3. Immediate. *
4. …and the result follows.
5. As a result, we find that…
6. One easily verifies that…
7.  The proof is left to the reader. *
8. The proof is left as an exercise.*
9. ….and the X theorem completes the proof.
10.  Clearly…
11. It can be shown that…
12. Trivially…
13. The proof is standard. 
14.  …the rest of the proof follows the same line.
15. …by a trivial argument…

Found on Urch.com.

We had a couple of young cats staying with us for some time. That is one of the cutest pictures we captured – sad but true, I haven’t seen either of them for about a month now.

One cat in a basket…

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19.08.2009 – am nächsten Morgen waren wir uns ganz so sicher, wie weit wir es heute überhaupt schaffen würden. Aykan hatte etwas Schmerzen in seinem linken Knie und Thiemos Hüfte schien sich auch bemerkbar zu machen. Doch zunächst einmal hieß es das Zelt zusammen zupacken und aufzubrechen. Schließlich brauchten wir für den heutigen Tag wieder genügend Kalorien.

Auf alle Fälle wollten wir es heute bis nach Fischingen schaffen. Auf dem Weg dorthin fanden wir einen kleinen Bäcker bei dem wir uns versorgen konnten. Jeder bekam eine Butterlaugenstange und eine Nussschnecke. Dabei lernten wir gleich, dass die Schweizer dieses süße Stückchen nur als Schnecke bezeichnen.

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18.08.2009 – oder die Fortsetzung der Pilgerreise vom Sommer 2008. Es wird wieder gepilgert, aber diesmal leider ohne Lara und dafür mit technischer Unterstützung und Oberschenkelkraft.  Unsere Route führt auf dem sogenannten Schwabenweg und startet in Konstanz und führt via Hörnli, Fischingen nach Einsiedeln. Das war zumindest mal unser Ziel für dieses Jahr. Spontan entschieden Thiemo und Aykan einen Tag zuvor den Weg nach Santiago zumindest ein wenig weiter fortzuführen. Der Weg ist das Ziel. Read the rest of this entry »

Nachdem unser Plan, durch die Schweiz auf dem Jakobsweg von Konstanz aus zu wandern, erstmal auf Eis lag und ich stattdessen entlang der Donau mit dem Fahrad von Ulm nach Wien gefahren bin, entschieden Aykan und ich uns nun doch sehr kurzfristig zumindest ein wenig dieses Jahr auf dem Jakobsweg weiter zu gehen. Der Plan war es mit dem Fahrrad von Konstanz nach Einsiedeln zu kommen. Das sind knapp 100 km, dafür hatten wir drei Tage Zeit.

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On my second to last day in Moscow, Alena and I decided to go for a day-trip to Sergiev Posad. Sergiev Posad is one of the “Golden Ring” towns, and is only about an hour and a half away from Moscow. For about 100 Roubles, you can get a one-way ticket. Already the train ride was quite interesting.

Instead of tele-shopping, all you need to do in Russia is travel with a local or regional train – you can get anything on those trains. Usually guys present you with the tools you may need to handle your live – starting with knives over to shoe polish, lamps or massage balls. This way, the train ride never gets boring!

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Tasty Russian pancakes

While I was in Moscow visiting Alena I also tried to learn some Russian cuisine or at least pretend to. While it seems quite difficult to get the exact type of cheese that was used to make these pancakes, they however, still taste quite delicious with sour cream and jam – right now, its plum season, so I actually eat them with plum jam.

Here I write up a recipe that is somewhat similar, however, as it appears we can not get the exact type of ingredients back home in Germany – so it requires some trying out.

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Wie bereits geschrieben, war die Vorbereitung für die Donauradwanderung eher spontan, da der ursprüngliche Plan des Weiterpilgerns auf dem Jakobsweg zunächst ins Wasser gefallen ist.  Wir hatten auch kein großes Equipment und mussten uns die Dinge einzeln zusammensuchen bzw. zusammenborgen.

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In spring 2009, the idea started to shape to visit Alena in Moscow in Summer. We haven”t seen each other since the US, which was in 2002/ 2003 even though she studied at American University of Bulgaria in Blagoevgrad and I had visited Bulgaria in 2006.

Alena and Thiemo on the Red square in front of the Basilius Cathedrale

Now however, was the time to be. It was fairly easy to find a date on when her vacation from work would match my vacation from studying in London. The only complicated thing is to get a visa for stay as a tourist. Before one can even apply for a visa, one needs to have an official invitation by some inviting institution. These invitations can be issued by individuals in Russia, however, this is rather complicated. So there is now a little industry of institutions issuing invitations for some renumeration. Read the rest of this entry »

Dieses Jahr war zunächst der Plan, den Jakobsweg weiter zu begehen. Von Konstanz über Einsiedeln zum Genfer See, also quasi quer durch die Schweiz. Die Pläne hierführ waren schon im Herbst 2008 gereift, als ich Franzi an der LSE kennen gelernt hatte. Die Vorbereitungen liefen schon sehr konkret, vor und während der Examen war das Wandern auf dem Jakobsweg ein Motivator. Read the rest of this entry »