Microcredits Impacts: Evidence From a Randomized Microcredit Essay

Exclusively available on Available only on IvyPanda® Made by Human No AI

Describing the Intervention

The article by Angelucci et al. (2015) focuses on a randomized experiment that was conducted by Compartamos Banco, the largest microlender in Mexico. Since it is a randomized experiment, the intervention implies treatment and control groups. On the one hand, the treatment group representatives were given access to door-to-door loan promotion and credit, with lending expansion at 110 percent of the annual percentage rate (APR). These participants provided their addresses to ensure that the financial organization would manage to reach potential loan recipients. On the other hand, the control group did not witness any loan promotion and failed to receive access to credit.

The proposed intervention’s objective was to identify how expanded access to microcredit could influence credit use in Mexico. It was decided to determine whether the intervention would result in any changes in six areas, including labor supply, subjective well-being, microentrepreneurship, social status, income, and expenditures. Another objective was to find out whether borrowing at higher interest rates implied negative distributional impacts among the studied population. The information above was necessary for the country to examine if some credit options could result in significant improvements for the citizens’’ well-being and financial state.

The intervention was implemented in north-central Sonora, Mexico, in early 2009. Compartamos Banco focused on “238 geographic ‘clusters’ (neighborhoods in urban areas, towns, or contiguous towns in rural areas)” (Angelucci et al., 2015, p. 152). These clusters included 16,560 surveys that addressed potential borrowers’ households and businesses. Consequently, the intervention covered a significant portion of the Mexican population, which also contributed to the generalizability of the results. It denotes that the article’s findings predict how the country can respond to expanded access to microcredit.

Summarizing the Findings

As has already been mentioned, the findings focus on the six domains, and the given section will comment on each of them in detail. Firstly, micro entrepreneurship activities demonstrated that increased access to credit opportunities contributed to growth in business size, but essentially higher revenue or a larger number of businesses were not found. Secondly, the domain of income focuses on different sources of earnings that relate to labor, remittances, business, and aid. The article did not find any statistically significant effects on income size within these four areas. Thirdly, the labor supply area was represented by the respondent’s participation in economic activities, a fraction of working children, and a number of relatives employed in the respondent’s business. The intervention did not result in any statistically significant improvement or deterioration in these spheres.

Fourthly, the respondents’ expenditures were analyzed based on the value of purchased assets within different categories. Little evidence was identified regarding the smaller spendings of the treatment group. However, statistically significant results refer to temptation goods, meaning that higher access to credit made households reduce their spending in this sphere. Fifthly, the intervention resulted in small increases regarding the respondents’ social status. The changes referred to higher school enrolment for children and the empowerment of women in households. A slight increase in the intra-household conflict was also identified because of women’s greater roles. Furthermore, statistically significant evidence shows that enhanced access to credit resulted in the respondents’ reduced participation in informal savings entities. Sixthly, the domain of subjective well-being witnessed statistically considerable improvement because the treatment group reported an essential decrease in depression. As for the effects within other areas, including satisfaction with the economic situation, health status, and others, the treatment group showed mixed results. Finally, the study analyzed distributional impacts and found no strong evidence for heterogeneity.

In conclusion, the six domains above generated 37 outcomes, but twelve of them only resulted in statistically significant effects. These findings refer to the level of depression, amount of purchased goods, attitude to informal savings groups, and others. However, the researchers admit that the intervention does not lead to “large effects on income, consumption, and wealth” (Angelucci et al., 2015, p. 178). These data denote that it is impossible to mention that the intervention under analysis was successful in enhancing people’s income or financial well-being irrespective of some positive changes that have been reported.

Comments on the Policy Implications of the Intervention

Since it has been mentioned that the study did not lead to statistically significant results regarding people’s income, it is reasonable to comment on what changes are necessary. One can say that the intervention should be expanded to a different country. It seems that it will not be beneficial to scale up the project within the Mexican context because the described intervention has already addressed a significant portion of this state’s population. Consequently, the introduction of a new country will mean that various cultural beliefs, behavioral traditions, and economic backgrounds will be involved. In this environment, it is possible to expect that the same intervention will generate essentially different outcomes.

In conclusion, one should highlight that a single modification will be suitable for the given intervention. Since Angelucci et al. (2015) admit that they failed to have a sample frame, it will be appropriate to choose a specific population group prior to implementing the intervention. In this fact, it will be possible to limit research focus to, for example, rural or urban areas, which will increase the study’s validity. This change will result in the fact that the study’s findings will be subject to smaller economic, political, and cultural influences because the respondents will represent a more cohesive group. Consequently, researchers will manage to limit the impact of the external environment on the intervention’s results.

Reference

Angelucci, M., Karlan, D., & Zinman, J. (2015). Microcredit impacts: Evidence from a randomized microcredit program placement experiment by Compartamos Banco. American Economic Journal, Applied Economics, 7(1), 151-182.

More related papers Related Essay Examples
Cite This paper
You're welcome to use this sample in your assignment. Be sure to cite it correctly

Reference

IvyPanda. (2022, February 21). Microcredits Impacts: Evidence From a Randomized Microcredit. https://ivypanda.com/essays/microcredits-impacts-evidence-from-a-randomized-microcredit/

Work Cited

"Microcredits Impacts: Evidence From a Randomized Microcredit." IvyPanda, 21 Feb. 2022, ivypanda.com/essays/microcredits-impacts-evidence-from-a-randomized-microcredit/.

References

IvyPanda. (2022) 'Microcredits Impacts: Evidence From a Randomized Microcredit'. 21 February.

References

IvyPanda. 2022. "Microcredits Impacts: Evidence From a Randomized Microcredit." February 21, 2022. https://ivypanda.com/essays/microcredits-impacts-evidence-from-a-randomized-microcredit/.

1. IvyPanda. "Microcredits Impacts: Evidence From a Randomized Microcredit." February 21, 2022. https://ivypanda.com/essays/microcredits-impacts-evidence-from-a-randomized-microcredit/.


Bibliography


IvyPanda. "Microcredits Impacts: Evidence From a Randomized Microcredit." February 21, 2022. https://ivypanda.com/essays/microcredits-impacts-evidence-from-a-randomized-microcredit/.

If, for any reason, you believe that this content should not be published on our website, please request its removal.
Updated:
This academic paper example has been carefully picked, checked and refined by our editorial team.
No AI was involved: only quilified experts contributed.
You are free to use it for the following purposes:
  • To find inspiration for your paper and overcome writer’s block
  • As a source of information (ensure proper referencing)
  • As a template for you assignment
Privacy Settings

IvyPanda uses cookies and similar technologies to enhance your experience, enabling functionalities such as:

  • Basic site functions
  • Ensuring secure, safe transactions
  • Secure account login
  • Remembering account, browser, and regional preferences
  • Remembering privacy and security settings
  • Analyzing site traffic and usage
  • Personalized search, content, and recommendations
  • Displaying relevant, targeted ads on and off IvyPanda

Please refer to IvyPanda's Cookies Policy and Privacy Policy for detailed information.

Required Cookies & Technologies
Always active

Certain technologies we use are essential for critical functions such as security and site integrity, account authentication, security and privacy preferences, internal site usage and maintenance data, and ensuring the site operates correctly for browsing and transactions.

Site Customization

Cookies and similar technologies are used to enhance your experience by:

  • Remembering general and regional preferences
  • Personalizing content, search, recommendations, and offers

Some functions, such as personalized recommendations, account preferences, or localization, may not work correctly without these technologies. For more details, please refer to IvyPanda's Cookies Policy.

Personalized Advertising

To enable personalized advertising (such as interest-based ads), we may share your data with our marketing and advertising partners using cookies and other technologies. These partners may have their own information collected about you. Turning off the personalized advertising setting won't stop you from seeing IvyPanda ads, but it may make the ads you see less relevant or more repetitive.

Personalized advertising may be considered a "sale" or "sharing" of the information under California and other state privacy laws, and you may have the right to opt out. Turning off personalized advertising allows you to exercise your right to opt out. Learn more in IvyPanda's Cookies Policy and Privacy Policy.

1 / 1