East Asia and Pacific
This paper evaluates the outreach and impact of two micro_nance programs in Thailand, controlling for endogenous self-selection and program placement. Results indicate that the wealthier villagers are signi_cantly more likely to participate than the poor. Moreover, the wealthiest often become program committee members and borrow substantially more than rank-and-_le members. However, local information on creditworthiness is also used to select members. The programs positively a_ect household welfare for committee members, but impact is insigni_cant for rank-and-_le members. Policy recommendations include vigilance in targeting the poor, publicly disseminating the program rules and purpose, and introducing and enforcing eligibility criteria.
Intervention settings: Rural/
Intervention description: Credit. Some savings, which may be used to provide loans.
Methodology: Pipeline design, panel data of participating and non-participating HH and moderate robustness.
Sample: 445 households. Most engage in small-scale agriculture (91.3% of women and 90.4% of men surveyed listed farming as primary or secondary occupation).
Findings: Positive impact on savings and business revenues of wealthier women members (no impact on poorer women). Increased business sales among wealthier members (no impact on poorer women). Wealthier women were more likely to participate in village banks than poor women (mistargeting).
Group Versus Individual Liability: Short and Long-term Evidence from Philippine Microcredit Lending GroupsGine and Karlan (2011)
Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in short-run or long-run default and larger groups after three years in pre-existing areas, and no change in default but fewer groups created after two years in the expansion areas.
Intervention settings: Rural.
Intervention description: Compares impact of individual and group liability credit, and group and individual savings models. Group (group solidarity) and individual-liability credit for business expansion provided by a rural bank. Mandatory savings for group liability loans; voluntary individual savings accounts. Initial loan $18 to $90.
Sample: 100% female microcredit and savings clients.
Findings: Conversion from group to individual liability did not negatively affect loan repayment rates. Individual loans (with no savings requirement) resulted in lower voluntary savings levels. Individual liability loans attracted more new clients.
Kaboski and Townsend (2005)
This paper uses variation in policies and institutional characteristics to evaluate the impacts of village-level microfinance institutions in rural Thailand. To identify impacts, we use policies related to the successful/unsuccessful provision of services as exogenous variation in effective financial intermediation. We find that institutions, particularly those with good policies, can promote asset growth, consumption smoothing and occupational mobility, and can decrease moneylender reliance. Specifically, cash-lending institutions-production credit groups and especially women's groups-are successful in providing intermediation and its benefits to members, while buffalo banks and rice banks are not. The policies identified as important to intermediation and benefits: the provision of savings services, especially pledged savings accounts; emergency services; and training and advice. Surprisingly, much publicized policies such as joint liability, default consequences, or repayment frequency had no measured impacts.
Intervention settings: Rural.
Intervention description: Credit (some training in income-generation), savings, village-level MFIs, and some use production credit groups and women's groups.
Methodology: Structural model, longitudinal dataset and moderate robustness.
Sample: Poor households.
Findings: Women's groups and pledged savings positively associated with increased job mobility. Women's groups positively affected business start-up. Positive impact of cash loans from production credit groups and women's groups on HH asset growth. Positive association of flexible and pledged savings products with less reduction of consumption. Negative effect of flexible savings on business formation and job mobility. Pledged savings weakly associated with starting a business. Weak effect of pledged savings on business formation.
Kaboski and Townsend (2009)
This paper evaluates the short-term impact of Thailand's 'Million Baht Village Fund' program, among the largest scale government microfinance iniative in the world, using pre- and post-program panel data and quasi-experimental cross-village variation in credit-per-household. We found that the village funds have increased total short-term credit, consumption, agricultural investment, income growth (from business and labor), but decreased overall asset growth. We also found a positive impact on wages, an important general equilibrium effect. The foundings are broadly consistent qualitatively with models of credit-constrained household behavior and models of intermediation and growth.
Intervention settings: Rural and peri-urban.
Intervention description: One-time government grant to establish village banks that offer credit.
Methodology: Quasiexperimental, natural experiment, panel data at HH level and moderate robustness.
Sample: 64 villages.
Findings: Positive impact on HH business and labor incomes Female-headed HHs 10% more likely to have positive and above-average business incomes. Increase in HH consumption of elastic goods (e.g. fuel, meat, dairy). Increase in HH business income. No impact on business formation or investment.
Karlan and Zinman (2011)
Microcredit institutions spend billions of dollars fighting poverty by making small loans primarily to female entrepreneurs. Proponents argue that microcredit mitigates market failures, spurs micro-enterprise growth, and boosts borrowers' well-being. We tested these hypotheses with the use of an innovative, replicable experimental design that randomly assigned individual liability microloans (of $225 on average) to 1601 individuals in the Philippines through credit scoring. After 11 to 22 months, we found evidence consistent with unmet demand at the current price (a roughly 60% annualized interest rate): Net borrowing increased in the treatment group relative to controls. However, the number of business activities and employees in the treatment group decreased relative to controls, and subjective well-being declined slightly. We also found little evidence that treatment effects were more pronounced for women. However, we did find that microloans increase ability to cope with risk, strengthen community ties, and increase access to informal credit. Thus, microcredit here may work, but through channels different from those often hypothesized by its proponents.
Intervention settings: Urban
Intervention description: Individual credit with median loan size of $220, 37% of average borrower's net monthly income. Assessed impact of offering access to individual loans to marginal clients who otherwise would have been rejected.
Sample: Less poor microentrepreneurs (incomes higher than poverty line)
Findings: Credit enabled clients to better manage economic risk. No conclusive evidence on business revenue. Negative impact on number of businesses of both women and men clients. Negative effect on the number of employees of both women and men clients.
Karlan, McConnell, Mullainathan and Zinman (2011)
We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with models of present-bias. Our model also generates the unique predictions that reminders may increase saving, and that reminders will be more effective when they increase the salience of a specific expenditure. We find support for these predictions in three field experiments that randomly assign reminders to new savings account holders.
Intervention settings: Peri-urban: Western Mindanao (Philippines); Unspecified locations: Bolivia and Peru.
Intervention description: Sending monthly reminders by text message or by letter to remind individuals who had opened savings accounts and established savings goals.
Sample: Customers of savings banks.
Findings: Overall, savings were 6% higher in banks sending monthly reminders.
Kaizen for Managerial Skills Improvement in Small and Medium Enterprises: An Impact Evaluation StudySonobe, Suzuki, and Otsuka (2011)
Intervention settings: Urban.
Intervention description: KAIZEN Production management training - to reduce non-value adding operations. Multifaceted classroom training and on-site KAIZEN training. Sample received both trainings, one or the other, or none.
Methodology: RCT - Randomized invitation to participate.
Sample: 100-180 male and female firm owners with typical revenues of $200-300,000 USD per year.
Findings: Entrepreneurs in the sample knew little about standard business practices and attached low value to learning management, but the training improved participants' business practices and recognition of importance of management knowledge. Male owners 20% more likely to participate in training given invitation than females. One year older increases probability of participating by 1-2%.