Microfinance Can Raise Incomes: Evidence from a Randomized Control Trial in China

74 Pages Posted: 24 Sep 2020

See all articles by Shu Cai

Shu Cai

Jinan University

Albert Park

Hong Kong University of Science & Technology (HKUST); Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS)

Sangui Wang

Renmin University - The School of Agriculture and Rural Development

Date Written: April 21, 2020

Abstract

This study evaluates the impact of a randomized control trial (RCT) in China that introduced externally funded village credit funds in poor, rural villages. In contrast to recent RCT-based studies that have failed to find evidence of significant increases in income from microfinance interventions, we find that the Chinese program significantly raises household income and reduces poverty. We explore possible explanations as to why the estimated impacts may be greater in China: lump-sum repayments, lower interest rates, less access to formal credit before the program, and greater potential returns from off-farm employment opportunities that are credit-constrained.

Keywords: microfinance, program evaluations, randomized control trial

JEL Classification: D12, D22, G21, I32, O16

Suggested Citation

Cai, Shu and Park, Albert and Wang, Sangui, Microfinance Can Raise Incomes: Evidence from a Randomized Control Trial in China (April 21, 2020). Available at SSRN: https://ssrn.com/abstract=3670721 or http://dx.doi.org/10.2139/ssrn.3670721

Shu Cai (Contact Author)

Jinan University ( email )

601 W. Huangpu Ave., Tianhe District
Guangzhou, Guangdong 510632
China

Albert Park

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS) ( email )

IAS 2019, Lo Ka Chung Building,
Lee Shau Kee Campus, HKUST
Clear Water Bay, Kowloon
Hong Kong

HOME PAGE: http://iems.ust.hk

Sangui Wang

Renmin University - The School of Agriculture and Rural Development ( email )

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