How does contract design affect the uptake of microcredit among the ultra-poor? : experimental evidence from the river islands of Northern Bangladesh

Despite the professed claims of microcredit alleviating poverty, little is known about what kind of credit contract is suitable for extremely poor households, also called the ultra-poor. To fill this knowledge gap, we initiated a field experiment in the river islands of northern Bangladesh, where a substantial portion of dwellers could be categorized as ultra-poor due to cyclic floods. We randomly offered four types of loans to such dwellers: regular small cash loans with one-year maturity, large cash loans with three-year maturity both with and without a one-year grace period, and in-kind livestock loans with three-year maturity and a one-year grace period. We compared uptake rates as well as the determinants of uptake and found that the uptake rate is the lowest for the regular contract, followed by the in-kind contract. Contrary to prior belief, we also found that the microcredit demand by the ultra-poor is not necessarily small, and in particular the ultra-poor are significantly more likely to join a microcredit program than the moderately poor if a grace period with longer maturity is attached to a large amount of credit, irrespective of whether the credit is provided in cash or in kind. This paper provides evidence that a typical microcredit contract with one-year maturity and without a grace period is not attractive to the ultra-poor. Microfinance institutions may need to design better credit contracts to address the poor's needs.

On the monitoring of surface displacement in connection with volcano reactivation in Tenerife, Canary Islands, using space techniques

Geodetic volcano monitoring in Tenerife has mainly focused on the Las Cañadas Caldera, where a geodetic micronetwork and a levelling profile are located. A sensitivity test of this geodetic network showed that it should be extended to cover the whole island for volcano monitoring purposes. Furthermore, InSAR allowed detecting two unexpected movements that were beyond the scope of the traditional geodetic network. These two facts prompted us to design and observe a GPS network covering the whole of Tenerife that was monitored in August 2000. The results obtained were accurate to one centimetre, and confirm one of the deformations, although they were not definitive enough to confirm the second one. Furthermore, new cases of possible subsidence have been detected in areas where InSAR could not be used to measure deformation due to low coherence. A first modelling attempt has been made using a very simple model and its results seem to indicate that the deformation observed and the groundwater level variation in the island may be related. Future observations will be necessary for further validation and to study the time evolution of the displacements, carry out interpretation work using different types of data (gravity, gases, etc) and develop models that represent the island more closely. The results obtained are important because they might affect the geodetic volcano monitoring on the island, which will only be really useful if it is capable of distinguishing between displacements that might be linked to volcanic activity and those produced by other causes. One important result in this work is that a new geodetic monitoring system based on two complementary techniques, InSAR and GPS, has been set up on Tenerife island. This the first time that the whole surface of any of the volcanic Canary Islands has been covered with a single network for this purpose. This research has displayed the need for further similar studies in the Canary Islands, at least on the islands which pose a greater risk of volcanic reactivation, such as Lanzarote and La Palma, where InSAR techniques have been used already.