Credit for women: Evidence from a citywide microfinance expansion

Principal Researchers: Profs. Rohini Pande, Erica Field, and Daniel Fetter (Harvard)

While microfinance, with its particular focus on poor women, is considered to be one of the best-funded policy instruments aimed at enhancing women’s well-being, there is little evidence as to how women respond to expanded credit opportunities. Many studies suggest that micro-credit improves women’s income and their decision making roles in their households. If this, in turn, enhance the overall households’ economic status, expanding credit opportunities for women in low-income countries has tremendous policy significance.

On the other hand, women in many such countries face significant discrimination and may be unwilling or unable to avail of credit opportunities. Even when they do, their ability to invest in profitable ventures may be limited. Access to savings facilities may also be an important factor to enhance the impact of credit. Many of these women are wage earners but make loan payments on a monthly basis. This means that they need some way of setting aside money during the month, and they would have difficulty saving if they live far from banks.

To shed light on these issues, the proposed research project will use data from SEWA Bank. Our analysis combines cross-sectional and time-series variation in the geographic reach of SEWA Bank. It seeks to examine if additional variation in clients’ access to social networks of Bank’s loan officers has an influence on women’s exposure to credit.

The first objective of the study is to provide credible estimates of the economic impact of micro-credit. We are testing whether clients who opened loan accounts saw faster income growth than clients who had savings but no loan accounts and whether geographic distance between a client and collection officers or the MFI’s collection points affects credit access. Using GPS coordinates for all clients, all collection officers (bank saathis), and other bank branches, the distance between clients and bank saathis will be used as an instrument variable to determine the impact of increased access to credit.

The second objective is to examine whether the borrowing behavior is also a function of the social network of the client. For instance, we will test whether the same caste/religion shared by a client and a loan officer acts as an important factor to change the client behavior.

CMF Research Associate: Ami Bhavsar

See some related CMF documents:
# Update on CMF-SEWA projects, July 2008 [PDF, 401KB]
# Project description presentation [PDF, 188KB]