Evaluating the impact of microcredit on borrowers in six countries
This paper seeks to identify the causal effects of expanded access to microcredit on borrowers and communities using six randomized evaluations. The evaluations are based on a variety of sampling, data collection, experimental design, and econometric strategies. The methods are deployed across urban and rural areas of six countries in four continents representing vast disparities in terms of borrower characteristics, loan characteristics, and lender characteristics. The paper finds a consistent pattern of modestly positive, but non-transformative effects of microcredit. Other highlights include:
Studies do not find clear evidence, or even suggestive evidence, of reductions in poverty or substantial improvements in living standards;
There is strong evidence suggesting that businesses expand, though the extent of expansion may be limited, and there are hints that profits increase with access to microcredit;
Analysis shows that it is likely for access to microcredit to have an effect on occupational choice, business scale, consumption choice, female decision power, and improved risk management;
There is little evidence of harmful effects of microcredit, even with individual lending at high real interest rates;
Analysis of heterogeneous treatment effects of the studies suggest the possibility of transformative effects on some segments of microlenders’ target populations.