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Recent studies have shown that the majority of the poor lack access to formal banking services of any kind (Banerjee and Duflo (2007), Collins et al. (2009)) and have emphasized the importance of enabling savings. A simple savings account was randomly offered to poor female household heads through local bank-branches in 17 slums in Nepal. 81% of the individuals offered the account took it up and 78% used it actively. Account holders made on average one deposit per week, saving about 9% of their weekly income and, within the first four months of opening the account made one withdrawal half the size of their weekly income. Access to the savings account increased monetary assets by 40% without causing any crowding out in other kind of assets. If anything, being offered the account had a positive and significant impact on ROSCA's contributions and overall value of animal stock.
Intervention settings: Peri-urban: Pokhara.
Intervention description: Flexible savings accounts were provided with no opening, deposit or withdrawal fees to female-headed households.
Sample: Female-headed households in 19 slums.
Findings: Total household assets increased in the treatment group (including an increase of 50% in monetary assets) after one year, with larger effects observed in lower and middle pre-intervention asset groups.
Banerjee et al (2013)
Microcredit has spread extremely rapidly since its beginnings in the late 1970s, but whether and how much it helps the poor is the subject of intense debate. This paper reports on the first randomized evaluation of the impact of introducing microcredit in a new market. Half of 104 slums in Hyderabad, India were randomly selected for opening of an MFI branch while the remainder were not. We show that the intervention increased total MFI borrowing, and study the effects on the creation and the profitability of small businesses, investment, and consumption. Fifteen to 18 months after lending began in treated areas, there was no effect of access to microcredit on average monthly expenditure per capita, but expenditure on durable goods increased in treated areas and the number of new businesses increased by one third. The effects of microcredit access are heterogeneous: households with an existing business at the time of the program invest more in durable goods, while their nondurable consumption does not change. Households with high propensity to become new business owners increase their durable goods spending and see a decrease in nondurable consumption, consistent with the need to pay a fixed cost to enter entrepreneurship. Households with low propensity to become business owners increase their nondurable spending. We find no impact on measures of health, education, or women's decision-making.
Intervention settings: Urban (Hyderabad).
Intervention description: Group liability credit in the amount of $200 (at market exchange rates, or $1,00 in PPP-adjusted rates) offered to groups of 6 to 10 women. Loan amounts may increase up to double on successful repayment. Also offered mortgage and insurance products, and savings accounts.
Sample: 2,800 adult, very poor women from slums.
Findings: 32% higher new business creation. Positive impact on business formation among female-headed HH and on business investment among HHs with existing businesses. Female-headed HH in intervention areas more likely to start new business. No significant impact on average total per capita expenditure; or women's business revenues, profits or number of employees. No impact on number of employees in women's businesses. No significant impact on women's business revenues or profits. No impact on women's decision-making on HH spending.
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.
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%.
Employment Generation in Rural Africa: Mid-term Results from an Experimental Evaluation of the Youth Opportunities Program in Northern UgandaBlattman et al (2011)
Can cash transfers promote employment and reduce poverty in rural Africa? Will lower youth unemployment and poverty reduce the risk of social instability? We experimentally evaluate one of Uganda's largest development programs, which provided thousands of young people nearly unconditional, unsupervised cash transfers to pay for vocational training, tools, and business start_up costs. Mid_term results after two years suggest four main findings. First, despite a lack of central monitoring and accountability, most youth invest the transfer in vocational skills and tools. Second, the economic impacts of the transfer are large: hours of nonhousehold employment double and cash earnings increase by nearly 50% relative to the control group. We estimate the transfer yields a real annual return on capital of 35% on average. Third, the evidence suggests that poor access to credit is a major reason youth cannot start these vocations in the absence of aid. Much of the heterogeneity in impacts is unexplained, however, and is unrelated to conventional economic measures of ability, suggesting we have much to learn about the determinants of entrepreneurship. Finally, these economic gains result in modest improvements in social stability. Measures of social cohesion and community support improve mildly, by roughly 5 to 10%, especially among males, most likely because the youth becomes a net giver rather than a net taker in his kin and community network. Most strikingly, we see a 50% fall in interpersonal aggression and disputes among males, but a 50% increase among females. Neither change seems related to economic performance nor does social cohesion a puzzle to be explored in the next phase of the study. These results suggest that increasing access to credit and capital could stimulate employment growth in rural Africa. In particular, unconditional and unsupervised cash transfers may be a more effective and cost-efficient form of large-scale aid than commonly believed. A second stage of data collection in 2012 will collect longitudinal economic impacts, additional data on political violence and behavior, and explore alternative theoretical mechanisms.
Intervention settings: Urban and Rural
Intervention description: Cash grant of $304 per average beneficiary.
Sample: 2,000 individuals (aged 16 to 35) then placed into groups.
Findings: Hours spent on income-generating activities increases by 24%. Earnings increase 18% but statistically insignificant (linear estimate).