Friday, August 3, 2007

Patting the Shark

The Economist mentions a study in which a South African payday lender is encouraged to extend credit to a number of marginal applicants who had previously been rejected. The results are rather positive.
...those reconsidered for a loan seemed to prosper. Six to twelve months later, they were less likely to go hungry, and their chances of being in poverty fell by 19%. Not coincidentally, they were also more likely to have kept their jobs, perhaps because the credit helped them to overcome emergencies that might otherwise have forced them to abandon their posts.

This surprised me. I will admit that I previously held that most payday lenders are out stealing money from those who don't understand Einstein's second most powerful force. Alex Tabarrok would label me a 'credit snob'.

Apparently, this view may be subject to review. Clearly, one study halfway around the world is not enough to constitute proof, but all information should be collected.

No comments: