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Measuring Microfinance: Assessing the Conflict between Practitioners and Researchers with Evidence from Nepal

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  • Rajbanshi, Ram
  • Huang, Meng
  • Wydick, Bruce

Abstract

What accounts for the discrepancy between microfinance impact claims of development practitioners and the far smaller impacts found in experimental studies? We demonstrate in a simple theoretical framework why “before-and-after” observations of practitioners overstate microfinance impacts and why estimations in some recent randomized trials understate the average treatment effect on the treated (ATT). Our empirical study uses a unique data set from eastern Nepal to study the impact of microfinance in villages where microfinance did not previously exist. We find that approximately three-fourths of the apparent impact of microfinance observed by practitioners is an illusion driven by correlated unobservable factors.

Suggested Citation

  • Rajbanshi, Ram & Huang, Meng & Wydick, Bruce, 2015. "Measuring Microfinance: Assessing the Conflict between Practitioners and Researchers with Evidence from Nepal," World Development, Elsevier, vol. 68(C), pages 30-47.
  • Handle: RePEc:eee:wdevel:v:68:y:2015:i:c:p:30-47
    DOI: 10.1016/j.worlddev.2014.11.011
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    References listed on IDEAS

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    Cited by:

    1. Radhakrishnan, Smitha, 2015. "“Low Profile” or Entrepreneurial? Gender, Class, and Cultural Adaptation in the Global Microfinance Industry," World Development, Elsevier, vol. 74(C), pages 264-274.

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