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Recent evidence suggests that the average effects of microfinance on borrowers is more modest than previously claimed. We carry out an experiment to test whether an intervention designed to increase aspirational hope among borrowers can elevate microfinance impacts. In collaboration with a microfinance lender in Mexico, we produced a documentary featuring successful borrowers within the organization and designed and implemented a hope curriculum rooted in positive psychology (Snyder, 1994), which conceptualizes hope as aspirations, agency, and pathways. Bank officers incorporated this curriculum into their regular weekly meetings with a randomly treated half of 52 women's savings and credit groups with 733 women over the course of one year. We find that the intervention modestly increased indices measuring both aspirational hope and microenterprise performance over this time period. The intervention significantly increased employment and plans to hire new employees. Increases in microenterprise sales and profits were positive but statistically insignificant. [ABSTRACT FROM AUTHOR]

A series of recent randomised trials estimate the impact of microfinance on incomes, consumption, and other key measures of welfare. This comment demonstrates why impact estimates obtained from experimental designs focusing on marginal microfinance borrowers are likely to understate the impacts yet realised by inframarginal borrowers, those having taken microfinance loans prior to implementation of an experiment, when field experiments are implemented in areas broadly served by microfinance. [ABSTRACT FROM PUBLISHER]

This paper reports the results of an experiment testing a fundamental assumption in Stiglitz and Weiss’ (1981) model of credit rationing: that defaulting borrowers are associated with investment in risky projects. Through an artefactual field experiment with 200 Bolivian microfinance borrowers, we observe that subjects from real-world delinquent borrowing groups do not prefer risky projects to safer ones significantly more than subjects from repaying groups. Instead, our results support more recent behavioural theories of credit market failure. Implications are that defaulting microfinance borrowers may be those who take too little investment risk rather than those who take too much. [ABSTRACT FROM PUBLISHER]

Summary: We measure the extent to which social networks determine sources of credit from a survey of 465 households in western Guatemala. We estimate correlated, contextual, and endogenous effects of networks at the neighborhood, church, and village levels, finding that church networks display endogenous effects in credit access. We calculate an elasticity of social imitation (ESI) indicating if the percentage of people accessing microfinance in a church network doubles, the probability of an individual household accessing microfinance increases by 14.1%, a magnitude similar to our estimated ESIs for televisions and cell phones within church and neighbor networks. [ABSTRACT FROM AUTHOR]

Microfinance has become an increasingly widespread tool for fostering economic growth among the poor in developing countries. This study tracks the progress of 239 borrowers in a Guatemalan microfinance institution from 1994 to 1999. Results from the study show that rapid gains in employment within the sample enterprises after initial credit access were followed by a protracted period of stagnation in employment growth. Other results highlight gender differences in response to credit access, showing — surprisingly — that the long-run growth in hired labour for female entrepreneurs was slightly greater than that for male entrepreneurs. [ABSTRACT FROM AUTHOR]

Summary: Rigorously estimating the effects of development programs is notoriously difficult. We present a methodology that borrows from “event studies” commonly used in the finance literature. In our RETRAFECT methodology, a retrospective panel dataset is created based on “fundamental” events in the history of surveyed households, events that are discrete, unforgettable, and important to welfare. We apply this methodology to examine home improvements among 1,672 households in Guatemala, India, and Ghana. Using village and country/year-level fixed effects, we find the probability of a major housing improvement increases from 0.038 to 0.070 in the years subsequent to a first microfinance loan. [ABSTRACT FROM AUTHOR]