Returns to Islamic Microfinance: Evidence from a Randomized Experiment in Pakistan
Maazullah, () and
Additional contact information
Maazullah,: ISS, Erasmus University Rotterdam
No 10965, IZA Discussion Papers from Institute of Labor Economics (IZA)
The global microfinance movement is driven by the claim that once poor micro-entrepreneurs are provided access to capital, they will be able to generate high returns. The existing evidence on returns to capital is mixed and too limited to substantiate this claim. This paper reports on a field experiment conducted in Pakistan, in co-operation with Akhuwat microfinance, in which interest free loans were randomly provided to microenterprises. We find that treatment leads to a significant increase in working capital and in business profits. Using randomized treatment as an instrument for capital, we find average monthly returns to capital of 8.6 to 11.9 a month. These returns are substantially higher than the interest rates charged by microfinance institutions in Pakistan.
Keywords: returns to capital; microfinance; microenterprises; randomized experiment; Akhuwat microfinance (search for similar items in EconPapers)
JEL-codes: O17 O16 C93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-exp and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp10965
Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Access Statistics for this paper
More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().