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MDGs and Microcredit: An Empirical Evaluation for Latin American Countries
Does credit positively impact income and education?
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43 pages
This study uses household survey data from a number of Latin American countries to investigate the degrees and effects of the access to credit on the income and education of poor households. The study aims to:
- Characterize individuals and firms receiving credit;
- Quantify the effects of such loans on education and income;
- Simulate different microcredit policies as a policy instrument to reach the Millennium Development Goals (MDGs) of:
- Eradicating poverty;
- Access to education for all;
- Empowerment of women.
The study runs multi-variate regressions to estimate the impact of credit to the poor on their labor income and the probability of their children staying on in school. The study finds that:
- Less than 10% of poor households in the sample have access to credit;
- Credit is positively linked to increase in income and attainment of education;
- The increase in probability of completing secondary school is on average higher than for primary school;
- Estimated costs are not very high in most cases.
The study concludes that:
- Microcredit might be a relatively powerful, but still limited tool for meeting the MDGs;
- Microcredit schemes should not be thought of as a substitute but as a complement to other long-term policies.
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