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Microfinance Can Raise Incomes: Evidence from a Randomized Controlled Trial in the People’s Republic of China

Author

Listed:
  • Shu Cai

    (Jinan University)

  • Albert Park

    (Asian Development Bank)

  • Sangui Wang

    (Renmin University of China)

Abstract

This study investigates the impacts of a government-led microcredit program in the People’s Republic of China (PRC) which was implemented at scale in poor rural areas, using a randomized controlled trial (RCT). In contrast to recent RCT-based studies that found no evidence of significant increases in income from microcredit interventions, we find that the Chinese program significantly raises household income and reduces poverty. We explore possible explanations for why the estimated impacts may be greater in the PRC, including larger loan size, lump sum repayments, lower interest rates, less access to formal credit before the program, and greater returns from credit constrained off-farm employment opportunities.

Suggested Citation

  • Shu Cai & Albert Park & Sangui Wang, 2025. "Microfinance Can Raise Incomes: Evidence from a Randomized Controlled Trial in the People’s Republic of China," ADB Economics Working Paper Series 812, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:021688
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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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