The Impacts of Microfinance: Evidence from Joint-Liability Lending in Mongolia

Abstract

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)

Impact of savings groups on the lives of the poor

“…The growth in financial intermediation resulting from the program led to improved microenterprise outcomes and women's empowerment. The positive impact on female empowerment stands in contrast to the results of six of seven randomized trials on microcredit (3,(7)(8)(9)(10)(11)(12)(13). However, when examining average treatment effects, much like the microcredit studies, we do not find impacts on typical welfare indicators, such as household income, consumption, food security, asset ownership, or community participation.…”

The Effectiveness of Micro-credit Programmes Focusing on Household Income, Expenditure and Savings: Evidence From Bangladesh

“…In particular, the empirical results of this study reveal that the household income, expenditures and savings increased by 1.15 percent, 1.13 percent, and 1.25 percent respectively per year. The findings of this study are similar to the studies that found a positive impact of microfinance on household income and expenditures (Hossain, 2012b;Rahman and Khan, 2013;Koloma and Alia, 2014;Attanasio et al, 2015;and Banerjee et al, 2015). It is worth noting that microfinancing is being provided to the poor who are unable to provide collateral and/or do not have access to commercial banks.…”

“…Some studies have concluded that access to microfinance positively influences the poor, while others have expressed scepticism about the contribution of microfinance to the socio-economic development of the poor. For example, several recent studies claimed that microfinance has a significant positive impact on poverty reduction (see Biosca, Lenton, and Mosely, 2014;Koloma and Alia, 2014;Attanasio et al, 2015;Banerjee et al, 2015). On the other hand, some studies found no impact of microfinance on household income and expenditures (see Duvendack and Palmer-Jones, 2012;Augsberg et al, 2015, Angelucci, Karlan andZinman, 2015).…”

Follow the money not the cash: Comparing methods for identifying consumption and investment responses to a liquidity shock

“…Substantively, there is little evidence of substantial non-business uses of microenterprise loans in this particular setting. This is surprising, given low impact on business growth in general from microcredit (Angelucci, Karlan, and Zinman 2015;Attanasio et al 2015;Augsburg et al 2015;Crépon et al 2015;Karlan and Zinman 2010), findings from a prior study with one of the lenders here that marginal borrowers decrease investment in their microenterprises (Karlan and Zinman 2011), and mounting concerns that people "over-borrow" to finance consumption (Zinman 2014). 28 It may seem peculiar that the proportion of respondents who report spending more than 2,500 on debt pay down in the explicit question asked by the surveyor (column 6) is higher than the proportion that report this when listing out their spending over the past 2 months (column 7).…”

“…4 See e.g. Angelucci, Karlan and Zinman (2015), Attanasio et al (2015), Augsburg et al (2015), , Crepon et al (2015), Karlan and Zinman (2010), Karlan and Zinman (2011), Tarozzi, Desai and Johnson (2015), and an overview in 5 See e.g. Souleles (1999); Souleles (2002); Shapiro and Slemrod (2003); Johnson, Parker, and Souleles (2006); Agarwal, Liu, and Souleles (2007); Shapiro and Slemrod (2009) ;Sahm, Shapiro, and Slemrod (2012); Parker et al (2013) 6 See the studies cited in the above footnote, with the exception of Karlan and Zinman (2010), which examines untargeted consumer loans.…”