Problem

1. Microfinance has spread very quickly in low-income countries. However, poor households in relatively high-income countries also lack access to financial services at reasonable prices. Why do financial access and constraints differ between low and high-income countries?

2. Consider an American investor based in New York City. She is attempting to diversify her portfolio across countries. Explain why investing in Kenya or Bolivia might seem riskier than investing in her own country. Contrast this scenario with the choice that a commercial bank manager faces when deciding to lend to high and low-income individuals within her own country.