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Win Some Lose Some? Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco

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  • Manuela Angelucci
  • Dean 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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19119.

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Date of creation: Jun 2013
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Handle: RePEc:nbr:nberwo:19119

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References

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  1. Orazio Attanasio & Britta Augsburg & Ralph De Haas & Emla Fitzsimons & Heike Harmgart, 2011. "Group lending or individual lending? Evidence from a randomised field experiment in Mongolia," Working Papers, European Bank for Reconstruction and Development, Office of the Chief Economist 136, European Bank for Reconstruction and Development, Office of the Chief Economist.
  2. S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
  3. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe & Schupp, Jürgen & Wagner, Gert G., 2009. "Individual risk attitudes: Measurement, determinants and behavioral consequences," Munich Reprints in Economics, University of Munich, Department of Economics 20049, University of Munich, Department of Economics.
  4. Suresh de Mel & David McKenzie & Christopher Woodruff, 2008. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(4), pages 1329-1372, November.
  5. Dean Karlan & Martin Valdivia, 2011. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 510-527, May.
  6. Basu, Karna, 2008. "Hyperbolic discounting and the sustainability of rotational savings arrangements," MPRA Paper 20440, University Library of Munich, Germany.
  7. Miles S. Kimball & Claudia R. Sahm & Matthew D. Shapiro, 2007. "Imputing Risk Tolerance from Survey Responses," NBER Working Papers 13337, National Bureau of Economic Research, Inc.
  8. Angelucci Manuela, 2008. "Love on the Rocks: Domestic Violence and Alcohol Abuse in Rural Mexico," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 8(1), pages 1-43, October.
  9. Lars Ivar Oppedal Berge & Kjetil Bjorvatn & Bertil Tungodden, 2011. "Human and financial capital for microenterprise development: Evidence from a field and lab experiment," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway 1, CMI (Chr. Michelsen Institute), Bergen, Norway.
  10. Michal Bauer & Julie Chytilova & Jonathan Morduch, 2012. "Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India," American Economic Review, American Economic Association, American Economic Association, vol. 102(2), pages 1118-39, April.
  11. David McKenzie & Christopher Woodruff, 2008. "Experimental Evidence on Returns to Capital and Access to Finance in Mexico," World Bank Economic Review, World Bank Group, World Bank Group, vol. 22(3), pages 457-482, November.
  12. Britta Augsburg & Ralph De Haas & Heike Harmgart & Costas Meghir, 2012. "Microfinance at the margin: Experimental evidence from Bosnia and Herzegovina," IFS Working Papers, Institute for Fiscal Studies W12/15, Institute for Fiscal Studies.
  13. de Mel, Suresh & McKenzie, David J. & Woodruff, Christopher, 2009. "Measuring microenterprise profits: Must we ask how the sausage is made?," Journal of Development Economics, Elsevier, Elsevier, vol. 88(1), pages 19-31, January.
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Citations

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Cited by:
  1. Roodman, David & Morduch, Jonathan, 2013. "The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence," CEI Working Paper Series, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University 2013-02, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  2. Karlan, Dean S. & Zinman, Jonathan, 2013. "Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9503, C.E.P.R. Discussion Papers.
  3. James Fenske & Achyuta Adhvaryu & Anant Nyshadham, 2014. "Early Life Circumstance and Adult Mental Health," Economics Series Working Papers 698, University of Oxford, Department of Economics.
  4. Felipe Kast & Dina Pomeranz, 2014. "Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile," NBER Working Papers 20239, National Bureau of Economic Research, Inc.
  5. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2013. "Savings by and for the Poor: A Research Review and Agenda," Working Papers, Economic Growth Center, Yale University 1027, Economic Growth Center, Yale University.
  6. Jaikishan Desai & Kristin Johnson & Alessandro Tarozzi, 2013. "On the Impact of Microcredit: Evidence from a Randomized Intervention in Rural Ethiopia," Working Papers 741, Barcelona Graduate School of Economics.
  7. Dean Karlan & Adam Osman & Jonathan Zinman, 2013. "Follow the Money: Methods for Identifying Consumption and Investment Responses to a Liquidity Shock," NBER Working Papers 19696, National Bureau of Economic Research, Inc.
  8. Dean Karlan, Aishwarya Lakshmi Ratan, Jonathan Zinman, 2013. "Savings by and for the Poor: A Research Review and Agenda-Working Paper 346," Working Papers, Center for Global Development 346, Center for Global Development.
  9. Dean Karlan, Jonathan Zinman, 2013. "Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico-Working Paper 331," Working Papers, Center for Global Development 331, Center for Global Development.

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