What do we know about the impact of microfinance? The problems of statistical power and precision

Mahesh Dahal and Nathan Fiala

World Development, 2020, vol. 128, issue C

Abstract: We review all eight randomized control trial studies of microfinance published in peer-reviewed journals. The studies generally show no or minimal impact from providing microloans to clients and have led many researchers and policy makers to conclude that microfinance has been proven to have little or no positive impacts on people’s lives. We review these studies in detail and find four main results. First, we are able to replicate the results using the researcher’s original data. Second, we observe that while the results are generally insignificant at traditional levels, most estimated coefficients are large. Third, every one of the studies is underpowered to detect reasonable effect sizes, often due to low take-up of the financial product offered. Pooling the data from the studies together improves power for most outcomes, but minimum detectable effect sizes are still large. Finally, when we run analysis on a pooled sample, we find a treatment effect on business profits, business revenue and household assets, significant at the 1% level. We argue that existing research on the impact of microfinance is generally underpowered to identify impacts reliably and suggests that we still know very little about the impact of microfinance. We end by discussing ways to improve future research.

Keywords: Microfinance; RCTs; Replication; Power calculations (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0305750X1930422X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:128:y:2020:i:c:s0305750x1930422x

DOI: 10.1016/j.worlddev.2019.104773

Access Statistics for this article

World Development is currently edited by O. T. Coomes

More articles in World Development from Elsevier
Bibliographic data for series maintained by Catherine Liu ().