Microcredit and poverty alleviation: The experimenters strike back

“GIVE a man a fish”, said Bono, an Irish singer turned philanthropist, “he’ll eat for a day. Give a woman microcredit, she, her husband, her children and her extended family will eat for a lifetime.” In the print edition of April 19th, we reviewed a paper by the World Bank that supports the notion that microfinance reduces poverty. The authors of the study, Shahidur Khandker and Hussain Samad, analysed observational data from households in Bangladesh spanning over two decades. They disputed the pessimistic results reported from many randomised controlled trials (RCTs) and found, on the contrary, that microcredit increases personal expenditure, household assets, labour supply and schooling of children. Now the experimenters are hitting back.A new experimental study by Bruno Crépon, Florencia Devoto, Esther Duflo and William Pariente investigates the impact of a microcredit programme in rural Morocco. The authors randomly assigned 162 villages to either the treatment group (given access to microcredit) or the control group (not given access to microcredit). The authors, all of whom are affiliated with the research organisation J-PAL (to give it its full name, the Abdul Latif Jameel Poverty Action Lab), found that microcredit is not an instrument “that fuels an exit from poverty…at least in the medium run.” On average, borrowers invested more in their own …

Link to article: www.economist.com/blogs/freeexchange/2014/06/microcredit-and-poverty-alleviation?fsrc=rss

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