Small Individual Loans and Mental Health: A Randomized Controlled Trial Among South African Adults

Assessing impact of microcredit on mental health
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This study examines effects of microcredit on psychological functioning and perceived stress levels.

The study involved a random review of loan applicants previously rejected by a lender in South Africa, resulting in approval of their applications. The subjects were assessed 6-12 months later on demographics, socio-economic status and two indicators of mental health. Findings include:

  • Receiving a second chance for a small individual loan increased perceived stress and decreased depressive symptoms among men;
  • Effects on women were insignificant.

The findings suggest that mechanisms used to reduce economic stress and improve socio-economic status of poor individuals may have mixed effects on psychological stress and mental health. They suggest that mental health should be included as a measure of success of poverty alleviation tools. Limitations of the study include marginal samples that may not represent borrowers within other societal contexts, lack of applicability of findings to group lending models, and absence of baseline information on the mental health measures.

About this Publication

By Fernald, L. et al.