High Noon for Microfinance Impact Evaluations: Re-Investigating the Evidence from Bangladesh

41 Pages Posted: 6 Jan 2011

See all articles by Maren Duvendack

Maren Duvendack

University of East Anglia (UEA)

Richard Palmer-Jones

University of East Anglia (UEA)

Date Written: January 6, 2011

Abstract

Recently, microfinance has come under increasing criticism raising questions of the validity of iconic studies which have justified the microfinance phenomenon. This paper applies propensity score matching (PSM), which has become widely used for the analysis of observational data, to the study by Pitt and Khandker (1998) which has been labelled the most rigorous evidence supporting claims that microfinance benefits the poorest especially when targeted on women. After carefully reconstructing the data we differentiate outcomes by gender of borrower, take account of borrowing from several formal and informal sources, and find that the mainly positive impacts of microfinance that we observe are shown by sensitivity analysis to be highly vulnerable to selection on unobservables, and we are therefore not convinced that the relationships between microfinance and outcomes are causal.

Keywords: Microfinance, Impact Evaluation, Propensity Score Matching, Sensitivity Analysis, Bangladesh

JEL Classification: C10, C31, O12

Suggested Citation

Duvendack, Maren and Palmer-Jones, Richard, High Noon for Microfinance Impact Evaluations: Re-Investigating the Evidence from Bangladesh (January 6, 2011). Available at SSRN: https://ssrn.com/abstract=1735615 or http://dx.doi.org/10.2139/ssrn.1735615

Maren Duvendack (Contact Author)

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

Richard Palmer-Jones

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

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