China backs Uganda's trade zone plan

From today's Business Daily:

Proposals for a vast trade zone near Lake Victoria in Uganda have won Chinese backing worth around $1.5 billion over the next three years.

It could be one of the region’s largest private investments though insiders say the zone is still a long way from getting off the ground.

The plans are for a free trade zone of 200 square miles, which would have a major impact on Uganda’s economy. 

Chinese money would fund a new port and logistics centre, an airport, roads and telecoms infrastructure, facilities for manufacturing companies and financial services, an agriculture training centre and residential and entertainment areas.

Microfinance appears to be working

Tim Hartford had an exceptionally good piece in Saturday's FT on just how: 

Karlan and Zinman wanted to know what value there might be in expanding access to credit. ZaFinCo was no dewy-eyed social business, but a hard-nosed, profit-minded company, charging 11.75 per cent per month on a four-month loan, or 200 per cent APR, much more than Compartamos was generally judged to have been charging.

Despite the high rates, the results were astonishing. "We expected to see some good effects and some bad," explained Karlan, who checked in with the experiment's participants six to 12 months after they had filed their initial loan applications. "But we basically only saw good effects."

Most strikingly, those "treated" by the experiment - that is, those for whom the computer requested a second chance at a loan - were much more likely to have kept their jobs than the control group. They were also much less likely to have dropped below the poverty line or to have gone hungry. All these outcomes were recorded well after the loan had been taken out and (usually) repaid, so this was not measuring a temporary debt-funded binge.

This seems mysterious. How can a loan at 200 per cent APR help people to stay out of poverty? One answer is that most people turned down for a 200 per cent APR loan would be able to get one at 300, 500 or over 1,000 per cent from an informal moneylender. More important is that these loans were not used to start businesses but to help people keep jobs that they already had. If a smart new blouse or a spare part for the family moped is what it takes to stay in work, then who is to say that an expensive loan isn't a wise investment?