J. Morduch - 1998
Does Microfinace really help the poor?
The microfinance movement has built on innovations in financial intermediation
that reduce the costs and risks of lending to poor households. Replications of the
movement’s flagship, the Grameen Bank of Bangladesh, have now spread around
the world. While programs aim to bring social and economic benefits to clients,
few attempts have been made to quantify benefits rigorously. This paper draws on
a new cross-sectional survey of nearly 1800 households, some of which are served
by the Grameen Bank and two similar programs, and some of which have no
access to programs. Households that are eligible to borrow and have access to the
programs do not have notably higher consumption levels than control households,
and, for the most part, their children are no more likely to be in school. Men also
tend to work harder, and women less. More favorably, relative to controls,
households eligible for programs have substantially (and significantly) lower
variation in consumption and labor supply across seasons. The most important
potential impacts are thus associated with the reduction of vulnerability, not of
poverty per se. The consumption-smoothing appears to be driven largely by
income-smoothing, not by borrowing and lending.
The evaluation holds lessons for studies of other programs in low-income
countries. While it is common to use fixed effects estimators to control for
unobservable variables correlated with the placement of programs, using fixed
effects estimators can exacerbate biases when, as here, programs target their
programs to specific populations within larger communities.
Key words: microfinance, project evaluation, Grameen Bank, Bangladesh
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