Where Credit is Due

This brief reviews seven randomized evaluations of microcredit with the objective of informing policy debates about its effects on low-income borrowers. These evaluations were conducted between 2003 and 2012, and they cover products tested in seven countries that are spread across four continents, which makes the sample representative of the global microcredit industry. In all seven studies, MFIs extended microcredit to randomly assigned individuals or communities who had not borrowed from it before, and evaluated the impact over time. Some of the key highlights from the brief include:

• In Ethiopia, India, Mexico, and Morocco, when MFIs offered loans to eligible borrowers, take-up ranged from 13% to 31%, which was much lower than partner MFIs originally forecasted;
• In Bosnia and Herzegovina and Mongolia, access to microcredit increased business ownership;
• Despite some evidence of business expansion, none of the seven studies found a significant impact on average household income for borrowers;
• Six studies suggest that microcredit played an important role in increasing borrowers’ freedom of choice in the ways they made money, consumed, invested, and managed risk;
• Microcredit did not lead to increases in children’s schooling in the six studies and only one of the four studies that measured women’s empowerment found a positive effect.