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Title:Has the introduction of microfinance crowded-out informal loans in Malawi? PDF Logo
Authors:Disney, Richard
Fichera, Eleonora
Owens, Trudy
Issue Date:2010
Series/Report no.:CREDIT Research Paper 10/08
Abstract:This paper uses household data to test whether microfinance institutions created by the Malawian government in the mid-1990s under its Poverty Alleviation Programme crowded out access to informal loans. As in several recent studies, the paper adopts policy evaluation techniques to identify a causal relationship between access to government-sponsored credit programmes and informal loans. After taking treatment heterogeneity into account with a multiple treatment model, the paper finds strong evidence of crowding out of formal group lending on informal sources. In particular, participation in the most widespread microfinance programme has a negative and significant effect on borrowing from informal sources, reducing on average the amount that members borrow from informal lenders by more than 70 percent of the average loan value.
Subjects:informal lending
microfinance
evaluation methods
JEL:O16
O17
Document Type:Working Paper
Appears in Collections:CREDIT Research Papers, The University of Nottingham

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