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Why RCTs failed to answer the biggest questions about microcredit impact

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  • Morduch, Jonathan

Abstract

If there was ever an economic debate that randomized controlled trials could help resolve, it seemed to be the debate over the average economic and social impact of microcredit. When the first RCTs were published in 2015, they undermined beliefs in the potential to reduce mass poverty through microcredit, cutting through years of methodological debate. In retrospect, however, the studies reveal challenges in drawing inferences across RCTs. By design, the studies focus on marginal customers and marginal locations. As a result, the RCTs are most interesting and informative on their own terms and in their own idiosyncratic contexts. While it is tempting to interpret the results broadly, the studies were never designed to measure the average impact of microcredit. Ultimately, the RCTs shifted views on the possibilities for expanding microcredit and generated valuable insights, but they also showed that a diversity of methods—from RCTs that explore other margins to ethnography and financial diaries—is required to assess the sector’s overall contributions.

Suggested Citation

  • Morduch, Jonathan, 2020. "Why RCTs failed to answer the biggest questions about microcredit impact," World Development, Elsevier, vol. 127(C).
    • Handle: RePEc:eee:wdevel:v:127:y:2020:i:c:s0305750x1930467x
    DOI: 10.1016/j.worlddev.2019.104818
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    References listed on IDEAS

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    Cited by:

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    2. Evan Borkum & Paolo Abarcar & Laura Meyer & Matthew Spitzer, "undated". "Jordan Refugee Livelihoods Development Impact Bond Evaluation Framework," Mathematica Policy Research Reports 602dafe521fe4467854dcd45e, Mathematica Policy Research.
    3. Nicholas Sabin, 2023. "Choosing partners: selection priorities of joint liability group leaders," Empirical Economics, Springer, vol. 64(1), pages 323-348, January.
    4. Masselus, Lise & Petrik, Christina & Ankel-Peters, Jörg, 2024. "Lost in the Design Space? Construct Validity in the Microfinance Literature," OSF Preprints nwp8k, Center for Open Science.
    5. Jonathan Fu & Annette Krauss, 2024. "Preparing fertile ground: how does the quality of business environments affect MSE growth?," Small Business Economics, Springer, vol. 63(1), pages 51-103, June.
    6. Schoofs, Annekathrin, 2022. "Promoting financial inclusion for savings groups: A financial education programme in rural Rwanda," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    7. Tahmasebi, Asghar & Askaribezayeh, Fatemeh, 2021. "Microfinance and social capital formation- a social network analysis approach," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).
    8. Jongwoo Chung & Booyuel Kim, 2024. "Impact of microfinance on income generation: Evidence from a rural community‐driven development programme in Myanmar," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(3), pages 1866-1879, April.

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