Has the Introduction of Microfinance Crowded-Out Informal Loans in Malawi?

Discussion Papers 10/08, University of Nottingham, CREDIT

39 Pages Posted: 5 Jan 2013

See all articles by Richard F. Disney

Richard F. Disney

University of Nottingham; Institute for Fiscal Studies (IFS); Axia Economics

Eleonora Fichera

University of Manchester

Trudy Owens

University of Nottingham - School of Economics

Date Written: October 4, 2009

Abstract

This paper uses household data to test whether microfinance institutions created by the Malawian government in the mid-1990s under its Poverty Alleviation Programme crowded out access to informal loans. As in several recent studies, the paper adopts policy evaluation techniques to identify a causal relationship between access to government-sponsored credit programmes and informal loans. After taking treatment heterogeneity into account with a multiple treatment model, the paper finds strong evidence of crowding out of formal group lending on informal sources. In particular, participation in the most widespread microfinance programme has a negative and significant effect on borrowing from informal sources, reducing on average the amount that members borrow from informal lenders by more than 70 percent of the average loan value.

Keywords: informal lending, microfinance, evaluation methods

JEL Classification: O16, O17

Suggested Citation

Disney, Richard F. and Fichera, Eleonora and Owens, Trudy, Has the Introduction of Microfinance Crowded-Out Informal Loans in Malawi? (October 4, 2009). Discussion Papers 10/08, University of Nottingham, CREDIT. Available at SSRN: https://ssrn.com/abstract=2196365 or http://dx.doi.org/10.2139/ssrn.2196365

Richard F. Disney

University of Nottingham ( email )

School of Economics
Nottingham NG7 2RD
United Kingdom
+44 115 951 5620 (Phone)
+44 115 951 4159 (Fax)

Institute for Fiscal Studies (IFS)

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Axia Economics ( email )

38 Concanon Road
London SW2 5TA
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Eleonora Fichera (Contact Author)

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

HOME PAGE: http://www.population-health.manchester.ac.uk/staff/EleonoraFichera/

Trudy Owens

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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