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Is Microcredit Effective? It Depends on the Context: New Results from a Study in Bolivia

Author

Listed:
  • Francesco Cecchi

    (Wageningen University)

  • Steffen Eriksen

    (University of Groningen)

  • Robert Lensink

    (University of Groningen)

  • Paul Mosley

    (The University of Sheffield)

Abstract

This study examines the effect of a microcredit program from a Bolivian microfinance institution. We use a cross-sectional dataset of nearly 2000 households. To identify the impact of the microcredit loan on various economic outcomes, we rely on the expansion plans provided by the Bolivian microfinance institute, which enables us to apply a double difference model in space. By comparing current borrowers with potential future borrowers, we control for self-selection bias and programme placement bias. While limited impacts are found on the sample as a whole, substantial differences are found when investigating the two regions in the sample separately. In one region, we observe that the new loans do not increase the total outstanding loans of the households, and thus, little impact are to be expected. In the second region, the loan finances a shift in agricultural activities towards business activities, as we observe a negative impact on agriculture results, but a positive impact on business revenues. This study stresses the importance of context, in that the impacts of microcredit even differ between regions within countries, e.g., depending on culture, experience, opportunities, welfare level, and complementary support (e.g., roads, markets, healthcare).

Suggested Citation

  • Francesco Cecchi & Steffen Eriksen & Robert Lensink & Paul Mosley, 2025. "Is Microcredit Effective? It Depends on the Context: New Results from a Study in Bolivia," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 37(3), pages 593-642, June.
    • Handle: RePEc:pal:eurjdr:v:37:y:2025:i:3:d:10.1057_s41287-025-00690-z
    DOI: 10.1057/s41287-025-00690-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Microcredit; Bolivia; Regional heterogeneity; Double difference;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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