Microfinance Can Raise Incomes: Evidence from a Randomized Controlled Trial in the People’s Republic of China

Shu Cai, Albert Park and Sangui Wang
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Shu Cai: Jinan University
Albert Park: Asian Development Bank
Sangui Wang: Renmin University of China

No 812, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This study investigates the impacts of a government-led microcredit program in the People’s Republic of China (PRC) which was implemented at scale in poor rural areas, using a randomized controlled trial (RCT). In contrast to recent RCT-based studies that found no evidence of significant increases in income from microcredit interventions, we find that the Chinese program significantly raises household income and reduces poverty. We explore possible explanations for why the estimated impacts may be greater in the PRC, including larger loan size, lump sum repayments, lower interest rates, less access to formal credit before the program, and greater returns from credit constrained off-farm employment opportunities.

Keywords: microfinance; program evaluations; randomized controlled trial (search for similar items in EconPapers)
JEL-codes: D12 D22 G21 I32 O16 (search for similar items in EconPapers)
Pages: 46
Date: 2025-10-20
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:021688

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