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Expanding Microenterprise Credit Access: Randomized Supply Decisions to Estimate the Impacts in Manila

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  • Karlan, Dean

    (Yale University and Innovations for Poverty Action)

  • Zinman, Jonathan

    (Dartmouth College and Innovations for Poverty Action)

Abstract

Microcredit seeks to promote business growth and improve well-being by expanding access to credit. We use a field experiment and follow-up survey to measure impacts of a credit expansion for microentrepreneurs in Manila. The effects are diffuse, heterogeneous, and surprising. Although there is some evidence that profits increase, the mechanism seems to be that businesses shrink by shedding unproductive workers. Overall, borrowing households substitute away from labor (in both family and outside businesses), and into education. We also find substitution away from formal insurance, along with increases in access to informal risk-sharing mechanisms. Our treatment effects are stronger for groups that are not typically targeted by microlenders: male and higher-income entrepreneurs. In all, our results suggest that microcredit works broadly through risk management and investment at the household level, rather than directly through the targeted businesses.

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Bibliographic Info

Paper provided by Yale University, Department of Economics in its series Working Papers with number 68.

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Date of creation: Jul 2009
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Handle: RePEc:ecl:yaleco:68

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  1. The Mothership of Microfinance Impact Studies has landed
    by philmader in governance across borders on 2011-08-19 15:48:30
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Cited by:
  1. Gine, Xavier & Jakiela, Pamela & Karlan, Dean & Morduch, Jonathan, 2006. "Microfinance games," Policy Research Working Paper Series 3959, The World Bank.
  2. Xu, Lisa & Zia, Bilal, 2012. "Financial literacy around the world : an overview of the evidence with practical suggestions for the way forward," Policy Research Working Paper Series 6107, The World Bank.

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