Journal Club Paper - From the Policy Action Lab at MIT. Further papers here
The Miracle of Microfinance: Evidence from a randomised evaluation
To date there have been no randomized trials examining the impact of microcredit. Using such a design, 52 of 104 slums in Hyderabad, India were randomly selected for opening of an MFI branch while the remainder were not. We show that the intervention increased total MFI borrowing, and study the e§ects on new business starts, investment, and consumption. House-
holds with an existing business at the time of the program invest in durable goods, and their profits increase. Households with high propensity to become business owners see a decrease in nondurable consumption, consistent with the need to pay a Öxed cost to enter entrepreneurship. Households with low propensity to become business owners see nondurable spending increase. We find no impact on measures of health, education, or womenís decision-making.
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