nep-mfd New Economics Papers
on Microfinance
Issue of 2018‒07‒16
three papers chosen by
Olivier Dagnelie
Université de Caen

  1. What do we know about the impact of microfinance? The problems of power and precision By Dahal, Mahesh; Fiala, Nathan
  2. Effect of Microfinance on Poverty and Welfare: New Evidence from 9 provinces in Cambodia By Dina Chhorn
  3. Discussing Social Business Innovations: An Interview with Professor Muhammad Yunus By Michael Wirtz; Christine Volkmann

  1. By: Dahal, Mahesh; Fiala, Nathan
    Abstract: Six randomized control trials were published simultaneously in one issue of the 'American Economic Journal: Applied Economics' in 2015. The studies show no or minimal impact from providing microloans to clients and have led many researchers and policy makers to conclude that microfinance has been proven to have little or no positive impacts on people's lives. We review in detail these six studies and find three main results. First, unsurprisingly, the insignificant results are replicable using the researcher's original data. Many coefficients are large, but very noisy. Second, every one of the studies is significantly underpowered. This is generally due to low take-up of the financial product offered. Pooling the data from the six studies together improves power for most outcomes, but minimum detectible effect sizes are still very large. Third, when we run analysis on the pooled sample, we find a treatment effect of 29% increase in profits, significant at the 5% level. We also obtain large impacts on business growth and household assets, but not for overall consumption. These results suggest that existing research on the impact of microfinance is generally underpowered to identify impacts, whether modest or zero, reliably. We end by discussing ways to improve future research on this topic.
    Keywords: microfinance,RCTs,replication,power calculations
    JEL: C13 D14 O10
    Date: 2018
  2. By: Dina Chhorn
    Abstract: The most recent studies at national level give emphasis to the failure of microfinance services in Cambodia since the bad practice is subordinate to high interest rate, non-productive loan, over-indebtedness, landless and migration. This paper examines the effect of microfinance, also putting weight on access to formal and productive loans, by using cross-sectional data in 2015 of 411 households, who are beneficiaries of the Agriculture Cooperative (AC) community supported by the World Vision, in 9 provinces of Cambodia. The binary choice model as well as bivariate and censoring model along with addressing the endogenous treatment effect were applied. The findings show that access to microfinance services in every aspect reduces poverty and promotes household’s welfare, proxied by per capita income, except there is insignificant effect on per capita economic assets and expenditure on child’s well-being after the Wald test of exogeneity and the Newey’s minimum chi-squared estimator with the twostep option were computed. However, these results must be interpreted with caution because the data is subject to specific sample selection.
    Keywords: Microfinance, poverty, welfare, Cambodia
    JEL: D33 D63 F16 F15 I24 I3
    Date: 2018
  3. By: Michael Wirtz (University of Wuppertal, Germany); Christine Volkmann (University of Wuppertal, Germany)
    Keywords: Social Business, Grameen Bank, Microfinance, Social Business Cities, Joint Ventures
    Date: 2018–06

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