Failure vs. displacement: Why an innovative anti-poverty program showed no net impact in South India

Bauchet, Jonathan; Morduch, Jonathan; Ravi, Shamika

doi:10.1016/j.jdeveco.2015.03.005

Cited by 41 publications

(37 citation statements)

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“…Note that benefits are measured in terms of increases in consumption rather than income. In contrast to these programs,Bauchet, Ravi, and Morduch (2015) find that a similar program in south India failed to deliver positive net benefits.Downloaded from https://academic.oup.com/wber/article-abstract/32/2/221/4971668 by Joint Bank-Fund library user on 12 July 2018…”

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confidence: 69%

The Microfinance Business Model: Enduring Subsidy and Modest Profit

Cull

Demirgüç-Kunt

Morduch

2018

The World Bank Economic Review

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Recent evidence suggests only modest social and economic impacts of microfinance. Favorable cost-benefit ratios then depend on low costs. This paper calculates the costs of microcredit and other elements of the microcredit business model using proprietary data on 1,335 microfinance institutions between 2005 and 2009, jointly serving 80.1 million borrowers. The costs of making small loans to poorer clients are high, and when revenues fall short of costs, subsidies are necessary to deliver services to those clients on a sustainable basis. Using a method that accounts for the opportunity costs of all forms of subsidy, the analysis finds that the median institution receives five cents of subsidy per dollar lent and $51 of subsidy per borrower (in PPP-adjusted terms). Relatively low levels of median subsidy suggest that even modest benefits of microcredit could yield impressive cost-benefit ratios. The distribution of subsidies is highly skewed, however: the average subsidy per dollar lent is 13 cents, and the average subsidy per borrower is $248. The data show that subsidies per borrower are substantially higher for commercial microfinance banks and some non-bank financial institutions that make relatively large loans. MFIs organized as non-governmental organizations (NGOs), in contrast, generally rely less on subsidy.

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confidence: 69%

The Microfinance Business Model: Enduring Subsidy and Modest Profit

Cull

Demirgüç-Kunt

Morduch

2018

The World Bank Economic Review

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“…Replication of positive ATEs over such a wide range of places certainly provides proof of concept for such a scheme. Yet Bauchet et al (2015) fail to replicate the result in South India, where the control group got access to much the same benefits. (Heckman, et al (2000) call this ‘substitution’ bias).…”

Section: Section 2: Using the Results Of Randomized Controlled Trialsmentioning

confidence: 99%

Understanding and misunderstanding randomized controlled trials

Deaton

Cartwright

2018

Social Science & Medicine

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Randomized Controlled Trials (RCTs) are increasingly popular in the social sciences, not only in medicine. We argue that the lay public, and sometimes researchers, put too much trust in RCTs over other methods of investigation. Contrary to frequent claims in the applied literature, randomization does not equalize everything other than the treatment in the treatment and control groups, it does not automatically deliver a precise estimate of the average treatment effect (ATE), and it does not relieve us of the need to think about (observed or unobserved) covariates. Finding out whether an estimate was generated by chance is more difficult than commonly believed. At best, an RCT yields an unbiased estimate, but this property is of limited practical value. Even then, estimates apply only to the sample selected for the trial, often no more than a convenience sample, and justification is required to extend the results to other groups, including any population to which the trial sample belongs, or to any individual, including an individual in the trial. Demanding ‘external validity’ is unhelpful because it expects too much of an RCT while undervaluing its potential contribution. RCTs do indeed require minimal assumptions and can operate with little prior knowledge. This is an advantage when persuading distrustful audiences, but it is a disadvantage for cumulative scientific progress, where prior knowledge should be built upon, not discarded. RCTs can play a role in building scientific knowledge and useful predictions but they can only do so as part of a cumulative program, combining with other methods, including conceptual and theoretical development, to discover not ‘what works’, but ‘why things work’.

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“…Buera, Kaboski, and Shin (2016) review empirical evidence on the impact of microfinance loans relative to other similar financial interventions, concluding that both grants of capital to microentrepreneurs and assets grants (often in the form of livestock) to the 'ultra-poor' have substantially larger impacts on recipients than microfinance loans. The returns on modest capital grants to micro-entrepreneurs are sizable (up to six months of pre-intervention profits for existing entrepreneurs) leading to greater investment and higher sustained profits (de Mel et al 2008, McKenzie 2016, and Fafchanps et al 2013, while asset grant programs to the ultra-poor have generally led to substantial increases in assets, income, and consumption (see Bandiera et al 2016;Bauchet et al 2015 give a counter-example).…”

Section: Nbfimentioning

confidence: 99%

Microfinance and Economic Development

Cull¹,

Morduch²

2017

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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Failure vs. displacement: Why an innovative anti-poverty program showed no net impact in South India

Cited by 41 publications

References 3 publications

The Microfinance Business Model: Enduring Subsidy and Modest Profit

The Microfinance Business Model: Enduring Subsidy and Modest Profit

Understanding and misunderstanding randomized controlled trials

Microfinance and Economic Development

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