Mic-Ra-finance and the illusion of control

Agree with your analysis, both that the claim that microfinance is superior to cash transfers depends on a preference for institutional as opposed to individual control and that Ra-worship generates that preference without regards to actual facts on the ground.

I think that in order to get to the claim that the additional work spent on identifying borrowers isn't doing any good, we need additional facts about microlending (like brought up by Givewell in the 6 myths post).

For example, if the local culture prized consuming X and the distant lender would only give out loans for expanding businesses and we have strong reason to believe that investment is better than consumption, then this decreases the cost of investment relative to consumption which probably gets us more investment which seems overall positive. But in fact microlending charities seem to mostly give loans for consumption reasons (probably because those are mostly what people demand?). If group lending offloaded most of the information cost to the locals who can acquire it more cheaply, that would be beneficial, except that most loans don't seem to be through group lending. And so on.

(The main effect that the current model seems like it would get us is the 'increased investment in attractiveness' effect--that is, one of the things that happens with legal kidney sales in Iran is that people who are trying to market their kidney will take efforts to be and seem healthier, so that they can get a higher price for their kidney / be more likely to be selected. Similarly, people putting more effort into formalizing their assets so that they can get loans more easily seems useful, but not as useful as encouraging savings.)