IZA DP No. 7439: Win Some Lose Some? Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco
substantially revised version published as "Microcredit Impacts: Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco" in: American Economic Journal: Applied Economics, 2015, 7 (1), 151-182
Theory and evidence have raised concerns that microcredit does more harm than good, particularly when offered at high interest rates. We use a clustered randomized trial, and household surveys of eligible borrowers and their businesses, to estimate impacts from an expansion of group lending at 110% APR by the largest microlender in Mexico. Average effects on a rich set of outcomes measured 18-34 months post-expansion suggest some good and little harm. Other estimators identify heterogeneous treatment effects and effects on outcome distributions, but again yield little support for the hypothesis that microcredit causes harm.