Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila

35 Pages Posted: 9 Sep 2009 Last revised: 7 Mar 2010

See all articles by Dean S. Karlan

Dean S. Karlan

Yale University; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Jonathan Zinman

Dartmouth College; Innovations for Poverty Action; Jameel Poverty Action Lab; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: July 15, 2009

Abstract

Microcredit seeks to promote business growth and improve well-being by expanding access to credit. We use a field experiment and follow-up survey to measure impacts of a credit expansion for microentrepreneurs in Manila. The effects are diffuse, heterogeneous, and surprising. Although there is some evidence that profits increase, the mechanism seems to be that businesses shrink by shedding unproductive workers. Overall, borrowing households substitute away from labor (in both family and outside businesses), and into education. We also find substitution away from formal insurance, along with increases in access to informal risk-sharing mechanisms. Our treatment effects are stronger for groups that are not typically targeted by microlenders: male and higher-income entrepreneurs. In all, our results suggest that microcredit works broadly through risk management and investment at the household level, rather than directly through the targeted businesses.

Keywords: ´╗┐microfinance, microcredit, microentreprenuership, risk sharing, formal and informal

JEL Classification: ´╗┐O1, D1, D2, G2

Suggested Citation

Karlan, Dean S. and Zinman, Jonathan, Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila (July 15, 2009). Yale Economics Department Working Paper No. 68; Yale University Economic Growth Center Discussion Paper No. 976. Available at SSRN: https://ssrn.com/abstract=1444990 or http://dx.doi.org/10.2139/ssrn.1444990

Dean S. Karlan (Contact Author)

Yale University ( email )

Box 208269
New Haven, CT 06520-8269
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Innovations for Poverty Action ( email )

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Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR) ( email )

London
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Jonathan Zinman

Dartmouth College ( email )

Hanover, NH 03755
United States
603-646-0075 (Phone)

HOME PAGE: http://https://sites.dartmouth.edu/jzinman/

Innovations for Poverty Action

1731 Connecticut Ave, 4th floor
New Haven, CT 20009
United States

Jameel Poverty Action Lab

E60-246
77 Massachusetts Avenue
Cambridge, MA 02139
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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