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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.

Suggested Citation

  • Duvendack, Maren & Palmer-Jones, Richard, 2011. "High Noon for Microfinance Impact Evaluations: Re-investigating the Evidence from Bangladesh," MPRA Paper 27902, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:27902
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    More about this item

    Keywords

    Microfinance; impact evaluation; Bangladesh; propensity score matching; sensitivity analysis;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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