How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance
Randomized controlled trials have found only modest effects of microfinance, but these studies focus on new clients. Existing estimates may thus understate ongoing gains for more experienced borrowers and the longer-run potential of microfinance. We estimate impacts of microfinance on experienced bo...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2019
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| Online Access: | https://hdl.handle.net/1721.1/122666 |
| _version_ | 1826210455752802304 |
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| author | Banerjee, Abhijit Duflo, Esther Hornbeck, Richard |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Banerjee, Abhijit Duflo, Esther Hornbeck, Richard |
| author_sort | Banerjee, Abhijit |
| collection | MIT |
| description | Randomized controlled trials have found only modest effects of microfinance, but these studies focus on new clients. Existing estimates may thus understate ongoing gains for more experienced borrowers and the longer-run potential of microfinance. We estimate impacts of microfinance on experienced borrowers, using an episode when a microfinance institution modestly increased existing clients’ fees in randomly selected villages (in exchange for a mandatory health insurance policy that turned out to be useless). This increase in fees led to a 22 percentage point decline in loan renewal in treatment villages (95% confidence interval: 16 to 27), compared to control villages where the policy was not introduced. Using this randomly generated variation in microfinance participation among experienced borrowers, we find impacts of microfinance that are strikingly similar to previous estimates for new clients: neither business outcomes nor household consumption were affected, on average. Also, consistent with prior studies, we find significant impacts on business outcomes among clients who had started their businesses before microfinance entered the village (0.06 standard deviation decline in an index of business outcomes from the loss of microfinance, 95% confidence interval: −0.002 to −0.12). However, despite these measured losses, these clients were just as willing to give up microfinance. |
| first_indexed | 2024-09-23T14:50:10Z |
| format | Article |
| id | mit-1721.1/122666 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T14:50:10Z |
| publishDate | 2019 |
| publisher | Wiley |
| record_format | dspace |
| spelling | mit-1721.1/1226662019-10-30T13:26:08Z How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance Banerjee, Abhijit Duflo, Esther Hornbeck, Richard Massachusetts Institute of Technology. Department of Economics Randomized controlled trials have found only modest effects of microfinance, but these studies focus on new clients. Existing estimates may thus understate ongoing gains for more experienced borrowers and the longer-run potential of microfinance. We estimate impacts of microfinance on experienced borrowers, using an episode when a microfinance institution modestly increased existing clients’ fees in randomly selected villages (in exchange for a mandatory health insurance policy that turned out to be useless). This increase in fees led to a 22 percentage point decline in loan renewal in treatment villages (95% confidence interval: 16 to 27), compared to control villages where the policy was not introduced. Using this randomly generated variation in microfinance participation among experienced borrowers, we find impacts of microfinance that are strikingly similar to previous estimates for new clients: neither business outcomes nor household consumption were affected, on average. Also, consistent with prior studies, we find significant impacts on business outcomes among clients who had started their businesses before microfinance entered the village (0.06 standard deviation decline in an index of business outcomes from the loss of microfinance, 95% confidence interval: −0.002 to −0.12). However, despite these measured losses, these clients were just as willing to give up microfinance. National Institutes of Health (U.S.) (Grant PO1 HD061315‐04) 2019-10-30T13:26:07Z 2019-10-30T13:26:07Z 2018-09 2018-03 2019-10-21T15:49:12Z Article http://purl.org/eprint/type/JournalArticle 0013-0427 https://hdl.handle.net/1721.1/122666 Banerjee, Abhijit et al. "How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance." Economica 85, 340 (October 2018): 671-700 © 2018 The London School of Economics and Political Science en http://dx.doi.org/10.1111/ecca.12271 Economica Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/octet-stream Wiley NBER |
| spellingShingle | Banerjee, Abhijit Duflo, Esther Hornbeck, Richard How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance |
| title | How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance |
| title_full | How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance |
| title_fullStr | How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance |
| title_full_unstemmed | How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance |
| title_short | How Much do Existing Borrowers Value Microfinance? Evidence from an Experiment on Bundling Microcredit and Insurance |
| title_sort | how much do existing borrowers value microfinance evidence from an experiment on bundling microcredit and insurance |
| url | https://hdl.handle.net/1721.1/122666 |
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