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The Impact Of Microcredit Programs On Self-Employment Profits: Do Noncredit Program Aspects Matter?

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  • Signe-Mary McKernan
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    Abstract

    Microcredit programs provide a two-tiered approach to poverty alleviation: credit for the purchase of capital inputs in order to promote self-employment and noncredit services and incentives. These noncredit aspects may be an important component of the success of microcredit programs. However, because they are costly to deliver and their contribution to the success of the programs is difficult to measure, they may not be properly valued. - This paper uses primary data on household participants and nonparticipants in Grameen Bank and two similar microcredit programs to measure the total and noncredit effects of microcredit program participation on productivity. The total effect is measured by estimating a profit equation and the noncredit effect by estimating the profit equation conditional on productive capital. Productive capital and program participation are treated as endogenous variables in the analysis. I find large positive effects of participation and the noncredit aspects of participation on self-employment profits. © 2002 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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    Bibliographic Info

    Article provided by MIT Press in its journal The Review of Economics and Statistics.

    Volume (Year): 84 (2002)
    Issue (Month): 1 (February)
    Pages: 93-115

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    Handle: RePEc:tpr:restat:v:84:y:2002:i:1:p:93-115

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    Web page: http://mitpress.mit.edu/journals/

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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    Cited by:
    1. Dean Karlan & Jonathan Zinman, 2007. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," Working Papers 956, Economic Growth Center, Yale University.
    2. Dean Karlan & Martin Valdivia, 2006. "Teaching entrepreneurship: Impact of business training on microfinance clients and institutions," Natural Field Experiments 00282, The Field Experiments Website.
    3. repec:msm:wpaper:2014/20 is not listed on IDEAS
    4. Hilson, Gavin & Ackah-Baidoo, Abigail, 2011. "Can Microcredit Services Alleviate Hardship in African Small-scale Mining Communities?," World Development, Elsevier, vol. 39(7), pages 1191-1203, July.
    5. Naveen K Shetty, 2008. "The Microfinance Promise in Financial Inclusion and Welfare of the Poor: Evidence from Karnataka, India," Working Papers 205 Keyword : Banking, Mi, Institute for Social and Economic Change, Bangalore.
    6. repec:dgr:uvatin:2003046 is not listed on IDEAS
    7. Dalla Pellegrina, Lucia, 2011. "Microfinance and Investment: A Comparison with Bank and Informal Lending," World Development, Elsevier, vol. 39(6), pages 882-897, June.
    8. Jonathan Zinman, 2008. "Restricting consumer credit access: household survey evidence on effects around the Oregon rate cap," Working Papers 08-32, Federal Reserve Bank of Philadelphia.
    9. Sievers, Merten & Vandenberg, Paul, 2007. "Synergies through Linkages: Who Benefits from Linking Micro-Finance and Business Development Services?," World Development, Elsevier, vol. 35(8), pages 1341-1358, August.
    10. Coleman, Brett E., 2006. "Microfinance in Northeast Thailand: Who benefits and how much?," World Development, Elsevier, vol. 34(9), pages 1612-1638, September.
    11. Nidhiya Menon & Yana van der Meulen Rodgers, 2011. "How Access to Credit Affects Self-employment: Differences by Gender during India's Rural Banking Reform," Journal of Development Studies, Taylor & Francis Journals, vol. 47(1), pages 48-69.
    12. Jia, Xiangping & Xiang, Cheng & Huang, Jikun, 2013. "Microfinance, self-employment, and entrepreneurs in less developed areas of rural China," China Economic Review, Elsevier, vol. 27(C), pages 94-103.
    13. Montgomery, Heather & Weiss, John, 2011. "Can Commercially-oriented Microfinance Help Meet the Millennium Development Goals? Evidence from Pakistan," World Development, Elsevier, vol. 39(1), pages 87-109, January.
    14. Felix Meier zu Selhausen & Erik Stam, 2013. "Husbands and Wives. The powers and perils of participation in a microfinance cooperative for female entrepreneurs," Working Papers 13-10, Utrecht School of Economics.

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