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High Noon for Microfinance Impact Evaluations: Re-investigating the Evidence from Bangladesh

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  • Duvendack, Maren
  • Palmer-Jones, Richard

Abstract

Recently, microfinance has come under increasing criticism raising questions of the validity of iconic studies which have justified the microfinance phenomenon. This paper applies propensity score matching (PSM), which has become widely used for the analysis of observational data, to the study by Pitt and Khandker (1998) which has been labelled the most rigorous evidence supporting claims that microfinance benefits the poorest especially when targeted on women. After carefully reconstructing the data we differentiate outcomes by gender of borrower, take account of borrowing from several formal and informal sources, and find that the mainly positive impacts of microfinance that we observe are shown by sensitivity analysis to be highly vulnerable to selection on unobservables, and we are therefore not convinced that the relationships between microfinance and outcomes are causal.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27902.

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Date of creation: 06 Jan 2011
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Handle: RePEc:pra:mprapa:27902

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Keywords: Microfinance; impact evaluation; Bangladesh; propensity score matching; sensitivity analysis;

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References

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  1. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, American Economic Association, vol. 73(1), pages 31-43, March.
  2. Jonathan Morduch, 1998. "Does Microfinance Really Help the Poor? New Evidence from Flagship Programs in Bangladesh," Working Papers, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies. 198, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  3. Hala Abou-Ali & Hesham El-Azony & Heba El-Laithy & Jonathan Haughton & Shahid Khandker, 2010. "Evaluating the impact of Egyptian Social Fund for Development programmes," Journal of Development Effectiveness, Taylor & Francis Journals, Taylor & Francis Journals, vol. 2(4), pages 521-555.
  4. Matthieu Chemin, 2008. "The Benefits and Costs of Microfinance: Evidence from Bangladesh," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 44(4), pages 463-484.
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  6. Khandker, Shahidur R., 2003. "Microfinance and poverty - evidence using panel data from Bangladesh," Policy Research Working Paper Series 2945, The World Bank.
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  21. 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.
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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. Djimeu, Eric W., 2014. "The impact of social action funds on child health in a conflict affected country: Evidence from Angola," Social Science & Medicine, Elsevier, Elsevier, vol. 106(C), pages 35-42.
  3. Quisumbing, Agnes R. & Baulch, Bob & Kumar, Neha, 2011. "Evaluating the long-term impact of antipoverty interventions in Bangladesh: An overview," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 1077, International Food Policy Research Institute (IFPRI).
  4. Ragasa, Catherine, 2012. "Gender and Institutional Dimensions of Agricultural Technology Adoption: A Review of Literature and Synthesis of 35 Case Studies," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 126747, International Association of Agricultural Economists.
  5. Duvendack, Maren & Palmer-Jones, Richard, 2011. "The microfinance of reproduction and the reproduction of microfinance: understanding the connections between microfinance, empowerment, contraception and fertility in Bangladesh in the 1990s," MPRA Paper 32384, University Library of Munich, Germany.

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