Analysis of…
Originally written as memo project for Quant II at Columbia SIPA, as response to prompt to evaluate MFI research for a hypothetical World Bank project. As the World Bank considers expanding its microfinance operations, we must first evaluate the evidence on whether microfinance actually has positive impacts on its recipients’ material well-being. Three recent studies shed light on microfinance’s impacts as measured by wealth, income, and expenditures: Banerjee and Duflo’s experimental 2010 research in which 104 slums in Hyderabad, India, were randomly selected for the opening of a microfinance institution (MFI); and Kondo (2008) and Montgomery’s (2015) two quasi-experimental studies that attempt to remove bias from observational data using a difference-in-differences model. Findings from the three studies are mixed. The strongest and most consistent impacts are on household expenditures related to starting or improving businesses, and related entrepreneurial activity. Banerjee and…