I forgot to mention yesterday how beautiful the view is from our hostel. We are in Sachsenhausen, a very traditional area of Frankfurt, and we overlooking the Main, the river that cuts through Frankfurt. You can see the entire skyline of Frankfurt from our rooms (I’m from New York, so it’s no where close to New York City in my opinion, but still pretty, with an international feel).
Today we spent our morning at the Frankfurt School of Finance and Management attending a crash course on microfinance. Our first lecture was an introduction to the concepts of microfinance by Professor Adalbert Winkler. In a quick overview, Winkler described microfinance as a way for an organization to provide low-income clients with loans that they would not normally be able to access in a regular bank. This organization is confident in distributing financial support because the people that it is lending to take out loans as a group. Everyone in the group is required to pay back part of the loan or cover for people who are unable too. Thus, when people form groups they must vet their partners to ensure that will not be deliquent on their loans. Additionally, loans are given to groups of people who are in diverse enterprises. So if 5 people, in 5 separate businesses get together and take out a loan then it is more likely that some of those businesses will succeed and someone will be able to repay the loan. But if five people who are all in the farming industry take out a loan, and it is a bad harvest, then no one will be able to pay back the loan. Most microfinance banks have not been moneymaking endeavors, in fact only around 200 of the 10,000 organizations are generating revenues. Many microfinance banks are begining to shift away from the non-governmental sector to get government support as well as provide the impoverished with a place where they can hold their savings. Microfinance is a developing effort to find a safer way of providing funds for the impoverished.
Microfinance is a relatively new form of lending that has been around for approximately 20 years. As a result there hasn’t been the same amound of academic research as there has on other topics in economics. Our second lecture, by Norah Becerra, was a presentation of how the Frankfurt School works to help microfinance organizations transition from NGO status to more government regulation. Our final lecture was an academic report by Charlotte Wagner comparing the abilities of traditional banks and microfinance banks in coping with financial crises. Based on the data she collected, in the 1990′s microfinance banks were able to withstand the financial crises better than traditional banks, but the expanision of microfinance banks and growth of microfinance investment has made the microfinance banks more vulnerable to the current crisis. Thus despite structural differences between microfinance banks and traditional banks, both are being negatively affected by the current financial crisis.
Tomorrow we are off to the European Central Bank (ECB) to study more European Economics! In the morning we will review the role and functions of the ECB and discuss Euro Area Enlargement. In the afternoon we will attend lectures on the EU and Neighboring Regions and Euro Area Imbalances and Adjustment. It’s going to be an intense, exciting day. I’m not sure what we will be doing tomorrow evening but Saturday morning we will be waking up around 6am to head back to Haverford. It’s likely that this will be my last post until we get back Saturday since we have to pay for internet. Anyways, I’m off to explore Frankfurt for the rest of the afternoon! See you soon Haverford, Ma and Pa I hope that the chocolates survive the flight, there might not be any left by the time we land….