Microfinance in Northeast Thailand: Who Benefits and How Much?

Using data from a unique survey conducted in 1995–1996, this paper controls for endogenous self-selection and program placement. Results indicate that even prior to program intervention, participants tend to be significantly wealthier than nonparticipants, and the wealthiest villagers are almost twice as likely to participate in the program as the poorer villagers. Moreover, the wealthiest in the village often become program committee members and use their positions to borrow substantially more than rank and file members. However, local information on individual creditworthiness is also used in member selection. Results demonstrate that microfinance loans positively affect many measures of household welfare for the wealthy committee members, but the impact is largely insignificant for poorer rank and file members. Policy recommendations include increased vigilance in targeting the poor, greater efforts to publicly disseminate the rules and purpose of the village bank program, and introduction and enforcement of eligibility criteria based on wealth while continuing to allow villagers to self-select.