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Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts

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  • Dean Karlan

    ()

  • Jonathan Zinman

Abstract

Expanding access to credit is a key ingredient of development strategies worldwide, and the microfinance industry is generally credited with success in helping to alleviate poverty and improve the lives of the poor. But there is less consensus on the role of consumer loans in credit expansion initiatives. In fact, many practitioners and policymakers are skeptical about the benefits of consumer lending. This working paper by CGD non-resident fellow Dean Karlan and Jonathan Zinman estimates the impacts of expanding the consumer credit supply using a South African field experiment in which some loan applicants who had been denied credit were randomly selected to be "unrejected" for a loan. They find that compared to those who did not receive credit, borrowers showed increased employment, reduced hunger and reduced poverty. The loans also appear to have been profitable for the lender. This paper is one in a series of six CGD working papers by Dean Karlan on various aspects of microfinance (Working Paper Nos. 106-111).

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Bibliographic Info

Paper provided by Center for Global Development in its series Working Papers with number 108.

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Length: 40 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:cgd:wpaper:108

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Web page: http://www.cgdev.org

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Keywords: access to credit; microfinance; consumer loans;

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References

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  2. Bart J. Wilson & David W. Findlay & James W. Meehan Jr. & Charissa Wellford & Karl Schurter, 2010. "An Experimental Analysis of the Demand for Payday Loans," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 93.
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