Asset-Based Microfinance for Microenterprises: Evidence from Pakistan
Faisal Bari, Kashif Malik, Muhammad Meki, Simon Quinn
American Economic Review · 2024 · Volume 114 · Issue 2
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 nonconvex capital adjustment costs rationalizes our results and allows counterfactual analysis; this highlights the potential for welfare improvements through large capital injections that are financially sustainable.
Keywords
Field Experiments, Firm Behavior: Empirical Analysis, Banks, Depository Institutions, Micro Finance Institutions, Mortgages, Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill, Firm Performance: Size, Diversification, and Scope, Industrialization, Manufacturing and Service Industries, Choice of Technology, Economic Development: Financial Markets, Saving and Capital Investment, Corporate Finance and Governance
Enable JavaScript for citation tools and additional paper interactions.