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Why RCTs failed to answer the biggest questions about microcredit impact

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  • Morduch, Jonathan

Abstract

If there was ever an economic debate that randomized controlled trials could help resolve, it seemed to be the debate over the average economic and social impact of microcredit. When the first RCTs were published in 2015, they undermined beliefs in the potential to reduce mass poverty through microcredit, cutting through years of methodological debate. In retrospect, however, the studies reveal challenges in drawing inferences across RCTs. By design, the studies focus on marginal customers and marginal locations. As a result, the RCTs are most interesting and informative on their own terms and in their own idiosyncratic contexts. While it is tempting to interpret the results broadly, the studies were never designed to measure the average impact of microcredit. Ultimately, the RCTs shifted views on the possibilities for expanding microcredit and generated valuable insights, but they also showed that a diversity of methods—from RCTs that explore other margins to ethnography and financial diaries—is required to assess the sector’s overall contributions.

Suggested Citation

  • Morduch, Jonathan, 2020. "Why RCTs failed to answer the biggest questions about microcredit impact," World Development, Elsevier, vol. 127(C).
    • Handle: RePEc:eee:wdevel:v:127:y:2020:i:c:s0305750x1930467x
    DOI: 10.1016/j.worlddev.2019.104818
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    References listed on IDEAS

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    3. Masselus, Lise & Petrik, Christina & Ankel-Peters, Jörg, 2024. "Lost in the design space? Construct validity in the microfinance literature," Ruhr Economic Papers 1097, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Shuangming Yin & Xiaojuan Chen & Xiangyu Zhou & Chao Chen & Jianxu Liu, 2023. "Effect of Micro-Credit for Poverty Alleviation on Income Growth and Poverty Alleviation—Empirical Evidence from Rural Areas in Hebei, China," Agriculture, MDPI, vol. 13(5), pages 1-17, May.
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    7. Nicholas Sabin, 2023. "Choosing partners: selection priorities of joint liability group leaders," Empirical Economics, Springer, vol. 64(1), pages 323-348, January.
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