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Applied Economics, Econometrics & Public Policy (CAGE) Seminar - Simon Quinn (Oxford)

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Location: S2.79

Title: Asset-based microfinance for microenterprises: Evidence from Pakistan

http://simonrquinn.com/PaperHigherPurchase.pdf 

Abstract: We run a field experiment offering graduated microcredit clients the opportunity to finance a business asset worth four times their usual borrowing limit. We implement this using a hire-purchase contract; our control group is offered a zero-interest loan at the usual borrowing limit. We find large, significant and persistent effects: treated microenterprise owners run larger businesses with higher profits; consequently, household consumption increases, particularly on food and children’s education. A dynamic structural model with non-convex capital adjustment costs rationalises our results and allows counterfactual analysis; this highlights the potential for welfare improvements through large capital injections that are financially sustainable..

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