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

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Author Info
Dean Karlan ()
Jonathan Zinman

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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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Publisher 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
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Handle: RePEc:cgd:wpaper:108

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

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Related research
Keywords: access to credit microfinance consumer loans

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
M20 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mark M. Pitt & Shahidur R. Khandker, 1998. "The Impact of Group-Based Credit Programs on Poor Households in Bangladesh: Does the Gender of Participants Matter?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 958-996, October. [Downloadable!] (restricted)
  2. Morduch, Jonathan, 2000. "The Microfinance Schism," World Development, Elsevier, vol. 28(4), pages 617-629, April. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Karlan, Dean S. & Zinman, Jonathan, 2007. "Credit Elasticities in Less-Developed Economies: Implications for Microfinance," CEPR Discussion Papers 6071, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Female Empowerment: Impact of a Commitment Savings Product in the Philippines," Working Papers 949, Economic Growth Center, Yale University. [Downloadable!]
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