Second Class - August 26

Goals

Learning

1. Cover the basic economics of borrowing and lending. Get students to understand the role of colateral and of interest payments.

2. Reason through the paradox of why there have been so many mortage defaults in the last couple of years yet micro credit has flourished with a very high repayment rate.

3. Talk about motivation and learning from the viewpoint of Yunus.

4. Talk about conventional wisdom and micro credit.

5. Talk about effective change and empowerment.

6. Discuss the issue in moving from micro credit to micro finance.

Administrivia

7. Get the students into teams.

8. Work through how the reflective posts will be graded.

Activities

Learning

1. Talk through why there is a spread in interest rates between what savers can receive and what borrowers have to pay. Discuss loan default. When is it rational? When do rich borrowers default? When do poor borrowers default?

2. What does the word micro mean in the context of micro credit? Why do micro loans work when macro may not loans may not?

3. How did Yunus come up with the micro credit idea? What was his motivation to keep at it. Why do most micro loans have women as the borrowers? Are there any broader generalizations we can draw from that?

4. What stereotypes existed before micro credit came into existence. Discuss effective change as insight in light of contrary conventional wisdom, first, and then discuss implementation issues that ensue thereafter.

5. What is the relationship between morale and effective change? How do the micro credit borrowers change as a consequence of the experience? What happens to their own confidence.

6. Discuss the financial institution that makes micro loans. What is the difference between such loans made by for profit institutions and loans made by banks such as the one Yunus founded, the Grameen Bank. Explore the consequences of this.

Administrivia

7. Sit students by 395 and 396. Get two teams of four from 396. And three teams from 395, one with four students, the other two with three. Have them pick a team name. Tell them the first letter of the team name.

8. Talk about portfolio approach. Talk about measuring level versus measuring growth. Talk about not knowing what to expect in student performance.