This paper reports results from the randomized evaluation of a group-lending microcredit program in Hyderabad, India. A lender worked in 52 randomly selected neighborhoods, leading to an 8.4 percentage point increase in takeup of microcredit. Small business investment and profits of preexisting businesses increased, but consumption did not significantly increase. Durable goods expenditure increased, while "temptation goods" expenditure declined. We found no significant changes in health, education, or women's empowerment. Two years later, after control areas had gained access to microcredit but households in treatment area had borrowed for longer and in larger amounts, very few significant differences persist. (JEL G21, G31, O16, O12, L25, I38)
Banerjee, Abhijit, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan.
"The Miracle of Microfinance? Evidence from a Randomized Evaluation."
American Economic Journal: Applied Economics,
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
Firm Performance: Size, Diversification, and Scope
Microeconomic Analyses of Economic Development
Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance