We present evidence from a randomized field experiment in rural Mongolia to assess the poverty impacts of a joint-liability microcredit program targeted at women. We find a positive impact of access to group loans on female entrepreneurship and household food consumption but not on total working hours or income in the household. A simultaneously introduced individual-liability microcredit program delivers no significant poverty impacts. Additional results on informal transfers to families and friends suggest that joint liability may deter borrowers from using loans for noninvestment purposes with stronger impacts as a result. We find no difference in repayment rates between both types of microcredit. (JEL G21, I32, I38, J16, L26, O15, O16)

Zettelmeyer, and numerous participants at various conferences and workshops for comments. Costas Meghir benefited from financial assistance from the Cowles foundation and the Institution for Social and Policy Studies (ISPS) at Yale. This project was conceived with the help of Francesca Cassano and benefited from continuous support from Borislav Petric and Ryan Elenbaum. Carly Petracco provided excellent research assistance. This RCT is registered on www.socialscienceregistry.org under number AEARCTR-0000304. The authors are solely responsible for errors and interpretations of the results, and the views presented do not necessarily reflect those of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We use an RCT to analyze the impacts of microcredit. The study population consists of loan applicants who were marginally rejected by an MFI in Bosnia. A random subset of these were offered a loan. We provide evidence of higher self-employment, increases in inventory, a reduction in the incidence of wage work and an increase in the labor supply of 16–19-year-olds in the household's business. We also present some evidence of increases in profits and a reduction in consumption and savings. There is no evidence that the program increased overall household income. (JEL C93, G21, I38, J23, L25, P34, P36)

Although microfinance institutions across the world are moving from group lending towards individual lending, this strategic shift is not substantiated by sufficient empirical evidence on the impact of both types of lending on borrowers. We present such evidence from a randomised field experiment in rural Mongolia. We find a positive impact of access to group loans on food consumption and entrepreneurship. Among households that were offered group loans the likelihood of owning an enterprise increases by 10 per cent more than in control villages. Enterprise profits increase over time as well, particularly for the less-educated. For individual lending on the other hand, we detect no significant increase in consumption or enterprise ownership. These results are in line with theories that stress the disciplining effect of group lending: joint liability may deter borrowers from using loans for non-investment purposes. Our results on informal transfers are consistent with this hypothesis. Borrowers in group-lending villages are less likely to make informal transfers to families and friends while borrowers in individual-lending villages are more likely to do so. We find no significant difference in repayment rates between the two lending programmes, neither of which entailed weekly repayment meetings.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe use an RCT to analyze the impact of microcredit on poverty reduction, child and teenage labour supply, and education. The study population consists of loan applicants to a major MFI in Bosnia who would have been rejected through regular screening. Access to credit allowed borrowers to start and expand small-scale businesses. Households that already had a business and where the borrower had more education, ran down savings, presumably to complement the loan and achieve the minimum investment amount. However, in less-educated households consumption went down. A key new finding is a substantial increase in the labor supply of children aged 16-19 year old together with a reduction in their school attendance, raising important questions about the unintended intergenerational consequences of relaxing liquidity constraints for self-employment and business creation or expansion.Keywords: Microfinance; liquidity constraints; human capital; randomized controlled trial JEL Codes: 016, G21, D21, I32 * The authors thank Joe Altonji, Erik Berglöf, Miriam Bruhn, Maren Duvendack, Karolin Kirschenmann, Emily Nix, Rohini Pande, David Roodman, Alessandro Tarozzi, Chris Udry, Jeromin Zettelmeyer, and participants at the 'Consumer Credit and Bankruptcy' conference in Cambridge, the 3ie conference 'Mind the Gap: From Evidence to Policy Impact' (Mexico), the International Development Centre seminar (London), the 5 th CEPR/EBC Winter Conference, the 21 st BREAD Conference (Yale), the ADB/IPA/J-PAL Impact and Policy Conference 'Evidence on Governance, Financial Inclusion, and Entrepreneurship', and seminars at the EBRD, Institute for Fiscal Studies, Paris School of Economics, University of Toulouse, Maastricht University, and the World Bank for useful comments. Costas Meghir benefited from financial assistance from the Cowles foundation and the The Institution for Social and Policy Studies (ISPS) at Yale. This project was conceived and promoted with the invaluable help of Francesca Cassano and benefited from continuous support from Borislav Petric and Ryan Elenbaum. Carly Petracco provided excellent research assistance. An earlier draft was entitled "Microfinance at the Margin: Experimental Evidence from Bosnia and Herzegovina". lead to a reduction of poverty and promote growth.Our paper addresses this question by analyzing the results of an experiment where we randomly allocated loans to a subset of applicants considered too ri...