The Miracle of Microfinance? Evidence from a Randomized Evaluation
Abhijit Banerjee, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan
American Economic Journal: Applied Economics.
Jan 2015, Vol. 7, No. 1:
Pages 22-53
The Miracle of Microfinance? Evidence from a Randomized Evaluation†
AbhijitBanerjee1, EstherDuflo2, RachelGlennerster3 and CynthiaKinnan4
1MIT Department of Economics, 40 Ames Street E17-201A, Cambridge, MA 02142 and National Bureau of Economic Research (NBER) and J-PAL (e-mail: [email protected])
2MIT Department of Economics, 40 Ames Street E17-201B, Cambridge, MA 02142 and NBER and J-PAL (e-mail: [email protected])
3J-PAL. 30 Wadsworth Street E53-320, Cambridge, MA 02142 (e-mail: [email protected])
4Northwestern University Department of Economics, 2001 Sheridan Road 3222, Evanston, IL 60208 and NBER and J-PAL (e-mail: [email protected])
Abstract
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)