Can Microfinance Unlock a Poverty Trap for Some Entrepreneurs?

Banerjee, Abhijit; Breza, Emily; Duflo, Esther; Kinnan, Cynthia

doi:10.2139/ssrn.3465363

Cited by 21 publications

(30 citation statements)

References 30 publications

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“…Karlan and Zinman (2012) study a longer-run horizon after many loan cycles have elapsed, and perhaps that is when we might see effects on health and education. Also, more recent works suggest that the modest impacts of microfinance are persistent and grow over time, especially for incumbent businesses (Banerjee et al 2019).…”

Section: Discussionmentioning

confidence: 99%

Microfinance and Diversification

Bandiera

Burgess

Deserranno³

et al. 2022

Economica

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The bulk of the world's extreme poor work in subsistence agriculture. Diversification out of this activity is often seen as the sine qua non of economic development. We evaluate whether the roll-out of a mainstay development intervention-microfinance-into poor, agricultural and largely unbanked populations in rural Uganda helps borrowers to diversify into non-agricultural labour activities. The new microfinance product is targeted to women, and differs from existing sources of formal and informal credit in that it allows them to borrow larger amounts but has inflexible repayment dates and the use of funds is monitored. We find that the arrival of microfinance enables women to diversify out of agriculture and into service-based activities such as small-scale trading. This low-level structural change, however, is not transformative in that it does not lead-at least after two years-to significant uplifts in earnings, consumption, savings, investment and overall wealth.

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Section: Discussionmentioning

confidence: 99%

Microfinance and Diversification

Bandiera

Burgess

Deserranno³

et al. 2022

Economica

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“…Second, we replicate and extend the Karnataka findings, leveraging an RCT conducted in 104 neighborhoods in Hyderabad, India, using cross-sectional survey data that we collected (Banerjee, Duflo, Glennerster, and Kinnan, 2015a;Banerjee, Breza, Duflo, and Kinnan, 2019a). In the RCT, entry by an MFI (Spandana) was randomized to half of the study neighborhoods.…”

Section: Introductionmentioning

confidence: 73%

“…The Hyderabad analysis draws on three waves of data. These data are also utilized in Banerjee et al (2015a) and Banerjee et al (2019a). The first round of data collection was conducted in late 2007 -early 2008, 15-18 months after microfinance was made available in the treatment group.…”

Section: Datamentioning

confidence: 99%

Changes in Social Network Structure in Response to Exposure to Formal Credit Markets

et al. 2021

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“…TRAIL households had higher mean and maximum productivity estimates; the 25th, 50th and 75th percentiles or the distribution of productivity were also higher for TRAIL Control 1 households. 38 The Bin 3 borrowers here could be thought of as equivalent to the gung-ho (GE) entrepreneurs in Banerjee et al (2019). Indeed, the Bin 1 borrowers are akin to the non-GE entrepreneurs in that they do not cultivate potatoes absent the AIL loan.…”

Section: Explaining Selection Differencesmentioning

confidence: 99%

Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries

Maitra

Mitra

Mookherjee

et al. 2020

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We compare two different methods of appointing a local commission agent as an intermediary for a credit program. In the Trader-Agent Intermediated Lending Scheme (TRAIL), the agent was a randomly selected established private trader, while in the Gram Panchayat-Agent Intermediated-Lending Scheme (GRAIL), he was randomly chosen from nominations by the elected village council. More TRAIL loans were taken up, but repayment rates were similar, and TRAIL loans had larger average impacts on borrowers' farm incomes. The majority of this difference in impacts is due to differences in treatment effects conditional on farmer productivity, rather than differences in borrower selection patterns. The findings can be explained by a model where TRAIL agents increased their middleman profits by helping more able treated borrowers reduce their unit costs and increase output. In contrast, for political reasons GRAIL agents monitored the less able treated borrowers and reduced their default risk.

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Can Microfinance Unlock a Poverty Trap for Some Entrepreneurs?

Cited by 21 publications

References 30 publications

Microfinance and Diversification

Microfinance and Diversification

Changes in Social Network Structure in Response to Exposure to Formal Credit Markets

Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries

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