If you walk through one of India’s biggest slums, Dharavi, in Mumbai, you'll be greeted by many smiling faces. Sure it’s not a very clean neighbourhood and large families have to live cramped together in small huts. But it doesn’t necessarily seem to make them unhappy. Dharavi in many ways doesn't fulfil the stereotypical image of poverty. 

In order to make appropriate policies for people living below the poverty line of 1.25 US dollars a day, organisations need to rethink the general perception of poverty, says economics professor Abhijeet Banerjee.

He spent most of his childhood around such slum huts. The kids that lived in them were happy for him to join their cricket games - not because of his cricketing skills, but because he could afford a better ball.

“The house I grew up in was literally the last house before a giant slum started. It meant that I could see poverty in any direction I wanted - or even if I didn’t want,” Banerjee remembers fondly.

These childhood experiences have probably led him to become the researcher he is today. Though he is now a professor at the Massachusetts Institute of Technology, Banerjee has never forgotten his Indian background. Being able to understand the thought processes of people living below the poverty line is essential in his research.

“We have become much more confident that we can conduct large-scale experiments in the field,” he says.  “Instead of thinking of abstract concepts in the office, we cooperate with organizations on the ground and see how we can help them.”

Surprisingly enough, the method professors Banerjee and his research partner Esther Duflo are using is novel in their field. In their book Poor Economics, they explain why working as a source of ideas instead of only evaluating ideas has been so successful.

Vaccinations in Udaipur
In India they looked at how to improve a vaccination scheme in Udaipur.

“The assumption was that parents don’t get their children vaccinated because they don’t believe in the necessity of vaccinating,” says Banerjee. “In fact we found that this was not true.”

Duflo and Banerjee's research revealed that it was actually a matter of convenience. Often parents would not show up at the vaccination centres because they were busy with other things. If they had to choose between working to get food on the table that night and getting their child vaccinated, feeding the family took priority.

“In this case, the mother was offered a kilo of dhal [lentils], every time she went to get her children vaccinated. When you do this, it more than doubles the vaccination rate, we found out.”

It wasn’t religious beliefs or backward thinking that prevented parents from bringing their children to be vaccinated, as the researchers initially thought. People just needed a little incentive to make it their priority.

Microcredit
Another issue that Banerjee and Duflo looked into was the effects of microcredit. Since the Grameen Bank in Bangladesh introduced the concept of giving small loans to spur entrepreneurship, it has received very mixed reviews. They range from the overwhelmingly positive in the beginning, to the more critical in recent years, when people became burdened with heavy debts.

But what was the real effect of microcredit? Part of the problem according to Banerjee is that often people with loans are compared to people without loans. This is like comparing apples with oranges, he says.

“If you are going to compare people who have an ambition to start a business to people who do not have that ambition or the skills to do that, you’ll see differences between those two, but that difference is not based on receiving micro credit. They’re just less ambitious”

Banerjee and Duflo studied a randomly selected group of 110 people, of whom 52 received loans. They focused on how the loan changed the lives of those who received it. Although they did not find that the loans had any negative effect, the researchers did expose a major flaw in the current system.

“What was going wrong is that there were many organisations all wanting to give loans to the same people. A disastrous situation was created where people started to borrow from organisation A to pay off organisation B”

Their research showed that the flaw wasn’t the idea of handing out loans in itself, but the way companies took advantage of how it was done.  

Small question big results
In Poor Economics, Banerjee and Duflo are very clear about the objective of their research. They do not pretend to be looking for the answer to the eradication of poverty. They are only trying to find solutions to the problems at hand.

They do so by leaving the comfortable confines of their offices and getting involved with people working in the field - much as Abhijeet Banerjee did as a child growing up next to one of the biggest slums in Kolkata. You can only understand people's problems when you start talking to them and stop making assumptions about their lives.