Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila

Jonathan Zinman and Dean Karlan

No 7396, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Microcredit seeks to promote business growth and improve well-being by expanding access to credit. We use a field experiment and follow-up survey to measure impacts of a credit expansion for microentrepreneurs in Manila. The effects are diffuse, heterogeneous, and surprising. Although there is some evidence that profits increase, the mechanism seems to be that businesses shrink by shedding unproductive workers. Overall, borrowing households substitute away from labor (in both family and outside businesses), and into education. We also find substitution away from formal insurance, along with increases in access to informal risk-sharing mechanisms. Our treatment effects are stronger for groups that are not typically targeted by microlenders: male and higher-income entrepreneurs. In all, our results suggest that microcredit works broadly through risk management and investment at the household level, rather than directly through the targeted businesses.

Keywords: Formal finance; Informal finance; Microcredit; Microentreprenuership; Microfinance; Risk sharing (search for similar items in EconPapers)
JEL-codes: D1 D2 G2 O2 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-agr and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (113)

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Related works:
Working Paper: Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila (2009)
Working Paper: Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila (2009)
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