Working Paper: CEPR ID: DP9506
Authors: Manuela Angelucci; Dean S. Karlan; Jonathan Zinman
Abstract: Theory and evidence have raised concerns that microcredit does more harm than good, particularly when offered at high interest rates. We use a clustered randomized trial, and household surveys of eligible borrowers and their businesses, to estimate impacts from an expansion of group lending at 110% APR by the largest microlender in Mexico. Average effects on a rich set of outcomes measured 18-34 months post-expansion suggest some good and little harm. Other estimators identify heterogeneous treatment effects and effects on outcome distributions, but again yield little support for the hypothesis that microcredit causes harm.
Keywords: Compartamos Banco; Microcredit; Microcredit Impact; Microentrepreneurship
JEL Codes: D12; D22; G21; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expanded access to microcredit (O16) | borrowing rates (G21) |
| expanded access to microcredit (O16) | business investment (G31) |
| expanded access to microcredit (O16) | consumption smoothing (D15) |
| expanded access to microcredit (O16) | business revenues (M21) |
| expanded access to microcredit (O16) | household expenditures (D12) |
| expanded access to microcredit (O16) | subjective measures of well-being (I31) |
| expanded access to microcredit (O16) | trust (G21) |
| expanded access to microcredit (O16) | decision-making power among women (D70) |
| expanded access to microcredit (O16) | likelihood of worsening outcomes (I14) |