The Miracle of Microfinance? Evidence from a Randomized Evaluation
30 May 2009, Banerjee, A., Duflo, E., Glennerster, R. & Kinnan, C.
Average Rating: (6 ratings)
see all ratings and reviews

Assessing impact of credit expansion using randomized evaluation

This paper evaluates the impact of introducing microcredit in a new market. It presents results of a study in Hyderabad, India, involving a sample of 104 slums. One half of these slums were randomly selected and given credit access by opening an MFI branch. The other half remained without such access.

The study examined effects on creation and profitability of small businesses, investment, and consumption 15 to 18 months after the program. Findings include:

• There was no effect of microcredit access on average monthly expenditure per capita, but expenditure on durables did increase;
• Households with an existing business at the time of the program invested in durable goods, and their profits increased;
• Households with high propensity to become business owners saw a decrease in non-durable consumption;
• Households with low propensity to become business owners saw non-durable spending increase;
• There was no impact on measures of health, education or women's decision-making.

In conclusion, in the short-term, microcredit may not be the miracle that it is sometimes claimed to be. It, however, does allow households to borrow, invest, and create and expand businesses.

24 Jan 2012

Interesting but the trial method and target could be improved

http:www.grameen-info.org\/index.php?option=com_content&task=view&id=33&Itemid=107

partha saha Australia

08 Sep 2009

Lack of conceptual clarity on Micro finance

The researchers and evaluators need to know some fundamentals on Micro finance. The title should be Miracle of Micro credit and not Micro finance. Mere lending to the small business men in a metropolitan city like Hyderabad is just money lending by any financial institution. Is it candid Microfinance?. Micro finance consisting of micro savings, micro insurance, other financial services and capacity building focuses on the poorest in rural area. Micro credit is one of the components of Micro finance and it is necessary but not sufficient for poverty reduction .and therefore ‘micro credit’ cannot fully represent Micro finance. Some useful research questions for the researchers. What are the basic tenets of MF ? What are the purpose of Micro finance for which it has emerged and who are the ultimate user or clients or customers? Who are the target groups?Is the casual relationship(cause and effect) between micro credit and income generation strong in a given area in a given vulnerable profile if the poorest ? Does the MFI justify in arranging all the components of Microfinance to the poor client ?Is micro credit alone suffice for sustaining the impact ? . If the project is limited to micro credit only, what is the impact in the project area(partly treated group) comparatively with the impact with the provision of all the components of MF (fully treated group)? How far the ethical and social considerations are examined correspondingly with other evaluative criteria under Micro finance in the context of reduction of poverty

Dr.V. Rengarajan Independent Consultant -Microfinance India

02 Sep 2009

Are microfinance impact assessments valid?

We need to understand the inputs be able to make sense of the outputs - the design of an MFI in terms of its products, services and delivery mechanisms and who they reach, as well as how these are delivered: • microfinance can include a lot of different services, delivered in a range of ways. If I planned to do an impact assessment of ‘health services’ I’d be quickly put in my place. Sure, we can assess the impact of a new drug, or a primary health clinic, or a vaccination programme. But assessing health services per se makes no sense – it’s too broad, too varied. • the consistency of delivery can vary within a single organisation. Without knowing exactly what was delivered and how the inputs the conclusions can be very mis-leading. For example a recent study of the impact of a new school book concluded that it had no impact; but the researchers forgot to ask if anyone had actually used the book! (they hadn't). So a ‘valid impact assessment’ would not just put huge resources into randomising and controlling for the results, but would provide very detailed analysis of what inputs were provided, how these varied, how these were experienced by clients. Analysis would then segment results in relation to a detailed analysis of variation in the inputs. Then and only then could we start to understand what input leads to what outputs and be able to make some generalisable claims about the impact of microfinance.

Anton Simanowitz Imp-Act Consortium United Kingdom

05 Aug 2009

Interesting, well-written article

This is an interesting response to claims that microfinance initiatives necessarily have positive impacts on the well-being of their clients – claims which seem to come from microfinance agencies and institutions themselves. This paper is grounded in objective data from the field and well-backed arguments, and presents the reader with impartial information about documented financial and social effects - both positive and negative - of a random sample of microfinance initiatives in Hyderabad, India. It’s nice to see that the authors balance their critique of what microfinance might be missing (short-term social impact goals of increased access to education, health or increased women's decision making) with data that illustrates how livelihood improvements can come about through the increased number of businesses started, profits increasing, etc., through these interventions. The authors effectively capture the contradictory nature of microfinance in an objective and helpful piece of work that meaningfully adds to the ongoing discourse around these timely issues.

Kendra Ott United States

30 Jun 2009

Switzerland

16 Jun 2009

The Miracle of Microfinance? Evidence from a Randomized Evaluation

gautam sinha BHU, Varanasi India

Download this Document

Download this Document

Journal Volume/Pages:
40

Publisher(s):
Abdul Latif Jameel Poverty Action Lab (J-PAL) & Center for Microfinance

About Us  |  Contact Us  |  Partners  |  Help  |  Site Map  |  Terms and Conditions  |  Privacy Policy  |  Manage Subscriptions

© CGAP 2012 ALL RIGHTS RESERVED