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Asset-based microfinance for Microenterprises: Evidence from Pakistan

Faisal Bari, Kashif Malik, Muhammad Meki and Simon Quinn

No 2021-03-02, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: We conduct a field experiment offering graduated microcredit clients the opportu-nity to finance a business asset worth four times their previous borrowing limit. We implement this using a hire-purchase contract; our control group is offered a zero-interest loan. We find large, significant and persistent effects from asset finance con¬tracts: treated microenterprise owners run larger businesses and enjoy higher profits; consequently, household consumption increases, particularly on food and children’s education. A dynamic structural model with non-convex capital adjustment costs ra¬tionalises our results; this highlights the potential for welfare improvements through large capital injections that are financially sustainable for microfinance institutions.

Date: 2021
New Economics Papers: this item is included in nep-dev, nep-exp, nep-isf and nep-mfd
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Related works:
Journal Article: Asset-Based Microfinance for Microenterprises: Evidence from Pakistan (2024) Downloads
Working Paper: Asset-based Microfinance for Microenterprises: Evidence from Pakistan (2021) Downloads
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