nep-mfd New Economics Papers
on Microfinance
Issue of 2022‒01‒10
one paper chosen by
Olivier Dagnelie
Université de Caen

  1. Asset-based microfinance for Microenterprises: Evidence from Pakistan By Faisal Bari; Kashif Malik; Muhammad Meki; Simon Quinn

  1. By: Faisal Bari; Kashif Malik; Muhammad Meki; Simon Quinn
    Abstract: We conduct a field experiment offering graduated microcredit clients the opportu-nity to finance a business asset worth four times their previous borrowing limit. We implement this using a hire-purchase contract; our control group is offered a zero-interest loan. We find large, significant and persistent effects from asset finance con¬tracts: treated microenterprise owners run larger businesses and enjoy higher profits; consequently, household consumption increases, particularly on food and children’s education. A dynamic structural model with non-convex capital adjustment costs ra¬tionalises our results; this highlights the potential for welfare improvements through large capital injections that are financially sustainable for microfinance institutions.
    Date: 2021

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