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Microcredit, Human Capital, and Personal Income Distribution: Empirical Evidence from Greater Cairo

  • Heiko Fritz

    ()

    (Faculty of Management Technology, The German University in Cairo)

  • Guenter Lang

    ()

    (Faculty of Management Technology, The German University in Cairo)

Providing the poor access to finance, microcredit is supposed to alleviate poverty and can be expected to reduce income inequality in developing countries. Drawing on a primary survey of 670 borrower households in Cairo in 2010, we run a number of cross-sectional regressions and simulations to assess the actual impact of microcredit. The paper yields three main findings. First, microloans have a clear positive impact on earnings. Second, the earning potential of male borrowers is significantly higher than of female borrowers which may be attributed to different levels of human capital. Third, microcredits increase income inequality in the population of borrowers as relatively rich borrowers disproportionally gain from improved access to finance.

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File URL: http://mgt.guc.edu.eg/wpapers/030fritz_lang2012.pdf
File Function: First version, 2012
Download Restriction: no

Paper provided by The German University in Cairo, Faculty of Management Technology in its series Working Papers with number 30.

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Length: 19 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:guc:wpaper:30
Contact details of provider: Web page: http://mgt.guc.edu.eg/economics/RePEc/guc/

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  1. Gine, Xavier & Jakiela, Pamela & Karlan, Dean & Morduch, Jonathan, 2006. "Microfinance games," Policy Research Working Paper Series 3959, The World Bank.
  2. Nguyen, Cuong & Bigman, David & Van den Berg, Marrit & Vu, Thieu, 2007. "Impact of Micro-credit on Poverty and Inequality: The Case of the Vietnam Bank for Social Policies," MPRA Paper 54154, University Library of Munich, Germany.
  3. James Copestake, 2002. "Inequality and the polarizing impact of microcredit: evidence from Zambia's copperbelt," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(6), pages 743-755.
  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, vol. 123(4), pages 1329-1372, November.
  5. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
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  7. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
  8. Hisako, KAI & Shigeyuki, HAMORI, 2009. "Microfinance and Inequality," MPRA Paper 17537, University Library of Munich, Germany.
  9. Coleman, Brett E., 1999. "The impact of group lending in Northeast Thailand," Journal of Development Economics, Elsevier, vol. 60(1), pages 105-141, October.
  10. Kuan Xu, 2003. "How Has the Literature on Gini's Index Evolved in the Past 80 Years?," Department of Economics at Dalhousie University working papers archive howgini, Dalhousie, Department of Economics.
  11. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2007. "Finance, inequality and the poor," Journal of Economic Growth, Springer, vol. 12(1), pages 27-49, March.
  12. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
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