Ideas to Action:

Independent research for global prosperity

Research Seminar Series (RSS)

Expanding Microenterprise Credit Access: The Impacts of Randomly Assigned Loans on Microenterprises in Manila

Tuesday, February 17, 2009 - 12:00pm to 1:30pm

Center for Global Development
and The Paul H. Nitze School of Advanced International Studies present
a Massachusetts Avenue Development Seminar (MADS)*

Dean Karlan
Department of Economics, Yale University

With discussant 
David McKenzie
Development Research Group, The World Bank

Tuesday, February 17, 2009 
Lunch will be served

Center for Global Development
1800 Massachusetts Avenue, NW, Third Floor, Washington, DC
Closest Metro:
Dupont Circle (Red Line)

Abstract: We work with a lender to randomize approvals of individual liability microenterprise loans to marginal applicants in the metropolitan Manila area of the Philippines. We then use an extensive follow-up survey to measure impact on borrowing, business outcomes, and household outcomes. Preliminary evidence suggests that expanding access to microcredit had an effect on borrowing, despite the presence of various borrowing options in the market. The average applicant who was "treated"-- randomly approved for a loan they normally would not have gotten -- shifted their borrowing from informal to formal sources. There is also evidence that the treated applicants who were most credit constrained ex-ante increased their total borrowing. We then examine the effects of these changes in borrowing composition on levels on household economic activity, household subjective well-being, business investment, business size, political participation and business profitability. 


*The Massachusetts Avenue Development Seminar (MADS) series is an effort by the Center for Global Development and The Paul H Nitze School of Advanced International Studies to take advantage of the incredible concentration of great international development scholars in the Metro Washington, DC area. The series seeks to bring together members of this community and improve communication between them.