Expanding Heterogeneous Factors Deemed Important: Revisiting the Impact of Microfinance on Businesses

Abstract

This paper revisits the experiment conducted by Angelucci et al. (2015) in which they ran a clustered randomized trial in Sonora, Mexico from 2009 to 2012 to estimate the impacts at the community level of offering microcredit to low-income women. The authors found that access to microcredit only marginally improved women’s lives. I analyze the dataset for heterogeneity and find that microcredit has a large impact on business growth among participants who owned a business before the experiment began and participants who lived in a rural area, which had higher credit constraints than urban areas. Among those who lived in a rural area, microcredit had large business returns for more educated people and women with no children. Since education and children are understudied heterogeneous factors, I analyze three more datasets, two from India and one from Ghana, to determine if my results in Mexico are portable to other settings. My results in these other settings show that education also leads to a higher impact from microfinance but the effect of children is influenced by context.