Preparing Fertile Ground: How Does the Business Environment Affect Outcomes From Microfinance?

62 Pages Posted: 11 Mar 2020 Last revised: 18 Dec 2020

See all articles by Jonathan Fu

Jonathan Fu

University of Zurich - Department of Banking and Finance; Center for Sustainable Finance and Private Wealth

Annette Krauss

University of Zurich - Department of Banking and Finance / CSP

Date Written: November 12, 2020

Abstract

We study the role of local business environments in explaining microfinance client outcomes using long-term nationwide administrative data and a natural experiment in a large microfinance market. Positive shocks to the business environment lead to significantly increased employment in exposed client enterprises compared to client enterprises in contextually similar districts but that are unexposed. Furthermore, business environment-level factors are overall more predictive for growth than individual- or business-level characteristics. To broaden the study’s implications and policy relevance, we pool data from prominent microcredit impact evaluations and demonstrate how related business environment factors help explain heterogeneity found in their results.

Keywords: microfinance impact, enterprise growth, business environments, natural experiment

JEL Classification: G21, D22, O12, R1

Suggested Citation

Fu, Jonathan and Krauss, Annette, Preparing Fertile Ground: How Does the Business Environment Affect Outcomes From Microfinance? (November 12, 2020). Available at SSRN: https://ssrn.com/abstract=3532466 or http://dx.doi.org/10.2139/ssrn.3532466

Jonathan Fu (Contact Author)

University of Zurich - Department of Banking and Finance; Center for Sustainable Finance and Private Wealth ( email )

Plattenstrasse 32
Zürich, CH-8032
Switzerland

HOME PAGE: http://https://www.bf.uzh.ch/de/persons/fu-jonathan

Annette Krauss

University of Zurich - Department of Banking and Finance / CSP ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

HOME PAGE: http://www.bf.uzh.ch

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