Chen and Snodgrass (2001)
This study measures the impact of microfinance services of Self Employed Women's Association (SEWA) on low-income women of Ahmedabad, in India. The explicit hypothesis was that specific impact may be found at three different levels - household, enterprise and the individual level. The data used for cross section and longitudinal statistical tests was from surveys conducted in 1998 and 2000 for 798 respondents. The researchers also carried out complementary analyses. The clients of SEWA were poor and belonged to backward sections of society. They faced severe discrimination and worked as micro entrepreneurs, subcontractors or casual laborers.
Intervention settings: Urban
Intervention description: Group liability credit (various types of training), savings and microinsurance.
Methodology: Quasi-experimental, statistical comparison of members and non-members, and panel data.
Sample: 798 very poor women working in informal sector (41% microentrepreneurs; 36% subcontractors; 22% casual laborers; only 1% salaried.) Most make under $1/day and belong to Backward of Scheduled castes or tribes (and all suffer severe gender/social class discrimination).
Findings: Informal sector earnings of clients' households increased. Postive impact on total business earnings of HH. Small impact on number of employees of HH microenterprises. No impact on women's businesses.
Cole et al (2012)
Financial engineering offers the potential to significantly reduce the consumption fluctuations faced by individuals, households, and firms. Yet much of this potential remains unfulfilled. This paper studies the adoption of an innovative rainfall insurance product designed to compensate low-income Indian farmers in the event of insufficient rainfall during the primary monsoon season. We first document relatively low adoption of this new risk management product: Only 5-10 percent of households purchase the insurance, even though they overwhelmingly cite rainfall variability as their most significant source of risk. We then conduct a series of randomized field experiments to test theories of why product adoption is so low. Insurance purchase is sensitive to price, with an estimated extensive price elasticity of demand ranging between -.66 and -0.88. Credit constraints, identified through the provision of random liquidity shocks, are a key barrier to participation, a result also consistent with household self-reports. Several experiments find that trust plays an important role in the decision to purchase insurance. We find mixed evidence that subtle psychological manipulations affect purchases and no evidence that modest attempts at financial education change households' decisions to participate. Based on our experimental results, we suggest preliminary lessons for improving the design of household risk management contracts.
Intervention settings: Rural: Andhra Pradesh and Gujarat.
Intervention description: Rainfall insurance offered to farmers at different discounted prices.
Sample: AP: 2,547 land-owning households; Gujarat: 1,500 households from 100 villages, in which the participating NGO marketing the rainfall insurance operated and located within 30 kms of a rainfall station. Gender included in the model but results not reported.
Findings: Take up strongly related to price, with estimated price elasticities ranging from -0.66 to -0.88. However, take-up was low (less than 50%) even when the price was heavily discounted. Demand appears to be constrained by liquidity.
de Mel et al (2008)
We use randomized grants to generate shocks to capital stock for a set of Sri Lankan microenterprises. We find the average real return to capital in these enterprises is 4.6-5.3 percent per month (55-63 percent per year), substantially higher than market interest rates. We then examine the heterogeneity of treatment effects. Returns are found to vary with entrepreneurial ability and with household wealth, but not to vary with measures of risk aversion or uncertainty. Treatment impacts are also significantly larger for enterprises owned by males; indeed, we find no positive return in enterprises owned by females.
Intervention settings: Urban.
Intervention description: Capital grants in cash or in kind ($100 or $200).
Sample: 385 microenterprises, 49% female-owned.
Findings: No significant impact on earnings.
de Mel et al (2009)
We report on a field experiment providing random grants to microenterprise owners. The grants generated large profit increases for male owners, but not for female owners. We show that the gender gap does not simply mask differences in ability, risk aversion, entrepreneurial attitudes, or differences in reporting behavior, but there is some evidence that the gender gap is larger in female-dominated industries. The data are not consistent with a unitary household model, and indeed, imply an inefficiency of resource allocation within households. We show evidence that this inefficiency is reduced in more cooperative households.
Intervention settings: Peri-urban.
Intervention description: Grants of $100 and $200 in cash or in-kind.
Sample: 405 low-capital microentrepreneurs (50% women).
Findings: Positive returns to capital for men's businesses; mixed impact on women's businesses. Women invest very little of smaller grants in business, but as much, if not more than men of the larger grant. Women do not experience permanent increases in business income from grants, while men do.
Feigenberg et al. (2011)
Microfinance clients were randomly assigned to repayment groups that met ei- ther weekly or monthly during their first loan cycle, and then graduated to identical meeting frequency for their second loan. Long-run survey data and a follow-up pub- lic goods experiment reveal that clients initially assigned to weekly groups interact more often and exhibit a higher willingness to pool risk with group members from their first loan cycle nearly two years after the experiment. They were also three times less likely to default on their second loan. Evidence from an additional treat- ment arm show that, holding meeting frequency fixed, the pattern is insensitive to repayment frequency during the first loan cycle. Taken together, these findings con- stitute the first experimental evidence on the economic returns to social interaction, and provide an alternative explanation for the success of the group lending model in reducing default risk.
Intervention settings: Urban and peri-urban.
Intervention description: Individual liability loans. Tested the impact of meeting frequency and social interaction on repayment rates of individual-liability loans.
Sample: First time microfinance bank clients living in peri-urban slums in the city of Kolkata. Over 70% owned a business and median client's HH income just below a dollar a day. 100% women.
Findings: In the absence of group liability and enforcement, more frequent group meetings led to greater social interaction and reduced default rates.
Field et al (2010)
Financiers across the world structure debt contracts to limit the risk of entrepreneurial lending. However, certain debt structures that reduce risk may inhibit enterprise growth, especially among the poor. We use a field experiment to estimate the short- and long-run impacts of varying the term structure of the classic microfinance loan product. While the classic microfinance loan contract requires clients to make small and frequent repayment installments beginning immediately after loan disbursement, clients in our treatment group instead received a two-month grace period before repay- ment began. The shift to a grace period contract increased clients' business investments in the short run and profits and income in the long run, but also their rate of default, indicating a shift towards investments with higher average but also more variable re- turns. In this manner, the absence of a grace period reduces risk but also the potential impact of microfinance on microenterprise growth and household poverty.
Intervention settings: Unknown
Intervention description: Group liability credit. Tested the benefit of using a grace period for loans instead of starting repayment immediately.
Sample: Poor microentrepreneurs and wage workers (75% have home-based business).
Findings: Positive impact of grace period on businesses of some women. Women with grace period invested 6% more of loans in businesses than those with no grace period. After two years, women with grace period increased average profits by 30%. 19% of women with a grace period group defaulted on loans, (compared to 2% default rate among women with standard repayment).
Do Traditional Institutions Constrain Female Entrepreneurship? A Field Experiment on Business Training in IndiaField, Jayachandran and Pande (2010)
Intervention settings: Urban
Intervention description: Training in business skills and identifying financial goals: A streamlined two-day version of SEWA Bank's financial literacy and business skills curricula, and added material on financial goals and business aspirations.
Sample: 597 poor, self-employed women. Homogenous in socio-economic status (education) but differing in religion and caste (Muslims, upper caste Hindus and scheduled caste hindus, each facing different mobility and social constraints).
Findings: Among upper caste Hindu women (more socially constrained than lower caste), training increased borrowing (13 percentage points, nearly twice the rate of controls) and business income (about 30%), and likelihood of engaging in labor market activity (25%). Muslim women, who face most restrictions, failed to benefit from the training program.
Gaurav, Cole and Tobacman (2011)
Recent financial liberalization in emerging economies has led to the rapid introduction of new financial products. Lack of experience with financial products, low levels of education, and low financial literacy may slow adoption of these products. This article reports on a field experiment that offered an innovative new financial product, rainfall insurance, to 600 small-scale farmers in India. A customized financial literacy and insurance education module communicating the need for personal financial management and the usefulness of formal hedging of agricultural production risks was offered to randomly selected farmers in Gujarat, India. The authors evaluate the effect of the financial literacy training and three marketing treatments using a randomized controlled trial. Financial education has a positive and significant effect on rainfall insurance adoption, increasing take-up from 8% to 16%. Only one marketing intervention, the money-back guarantee, has a consistent and large effect on farmers' purchase decisions. This guarantee, comparable to a price reduction of approximately 40%, increases demand by seven percentage points.
Intervention settings: Rural: Gujarat.
Intervention description: Farmers offered rainfall insurance, with some offered a money-back guarantee (equivalent to a 60% price discount). Half of the treatment group was also given financial literacy training in two three-hour sessions.
Sample: Small-scale land-owning farmers from rainfed villages in coastal districts; 2/3 of sample own less than 4 hectares of land. Gender included in model but gender-specific effects not reported.
Findings: The training increased the take up by 8.1% (compared to a base take-up rate of 8%). The 60% price discount increases the base take-up rate by 6.9 percentage points.
Microfinance and Poverty: Using Panel Data from BangladeshKhandker (2005)
Microfinance supports mainly informal activities that often have a low return and low market demand. It may therefore be hypothesized that the aggregate poverty impact of microfinance is modest or even nonexistent. If true, the poverty impact of microfinance observed at the participant level represents either income redistribution or short-run income generation from the microfinance intervention. This article examines the effects of microfinance on poverty reduction at both the participant and the aggregate levels using panel data from Bangladesh. The results suggest that access to microfinance contributes to poverty reduction, especially for female participants, and to overall poverty reduction at the village level. Microfinance thus helps not only poor participants but also the local economy.
Intervention settings: Rural.
Intervention description: Group-liability credit for income-generation activity. Some loans for consumption and housing.
Methodology: Ex-post evaluation with panel data of clients and non-clients.
Sample: Mainly women; very poor and poor.
Findings: Credit led to much higher poverty reduction among women clients' HHs than among men's. Slightly higher impact on HHs in exterme poverty, than those in moderate poverty. MF accounts for more than half of the 3% decline in poverty among clients. Female borrowing has a positive effect on HH food consumption (male borrowing has no effect).
Women's land rights are increasingly put forth as a means to promote development by empowering women and increasing productivity and welfare. However, little empirical research has evaluated these claims. I use the 2001 Nepal Demographic and Health Survey to explore whether women's land rights empower women and benefit young children's health. Regression models provide evidence that land rights empower women by increasing their control over household decision making. Regression models using nutritional indicators also support the hypothesis that women's land rights benefit children's health. Children of mothers who own land are significantly less likely to be severely underweight or stunted.
Intervention description: Land titling.
Methodology: Logit models for empowerment measure and decision-making measure with 2001 DHS data.
Sample: 4,884 women.
Findings: Women who own land more likely to have final word in household decision-making. Inverse relationship between women's land rights and children's malnutrition, a relationship attributed primarily to the additional income and resources that women's ownership of land brings, rather than the empowering effect of land ownership.