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Microfinance and Poverty Alleviation: Experimental Evidence from Bosnia and Herzegovina
Initial registration date
Not yet registered
March 21, 2014 5:46 AM EDT
Other Primary Investigator(s)
Institute for Fiscal Studies
Additional Trial Information
We use an RCT to analyze the impact of microcredit on poverty reduction. The study population consists of loan applicants to a large microfinance institution in Bosnia and Herzegovina who would have been rejected through regular screening. Access to credit allowed borrowers to start and expand small-scale businesses. There is little evidence that this led to net increases in household income. Households that already had a business and where the borrower had more education, ran down savings, presumably to complement the loan and achieve the minimum investment amount. In less-educated households, where assets were low, consumption went down instead. For these households the labor supply of teenage children aged 16-19 increased, and their school attendance declined.
Augsburg, Britta et al. 2014. "Microfinance and Poverty Alleviation: Experimental Evidence from Bosnia and Herzegovina." AEA RCT Registry. March 21.
About 1,200 marginal loan applicants were selected of which about half received an individual-liability microcredit (T) and the other half did not receive credit for the duration of the experiment (C).
Intervention Start Date
Intervention End Date
Primary Outcomes (end points)
Business start-up, consumption, asset ownership, stress levels, income, profits, labour supply adults and children, savings, schooling.
Primary Outcomes (explanation)
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
The experiment started with the research team conducting training sessions with all loan officers in all branches of our collaborating MFI (which operates across all of Bosnia and Herzegovina). During these sessions officers were instructed how to identify clients they would normally reject, but to whom they would consider lending if they were to accept slightly more risk. Once all officers were trained, and following a pilot in November 2008 in two branches in Gradačac and Bijeljina, the experiment was rolled out two months later to all 14 branches of our MFI. Loan officers were now asked to start identifying potential marginal clients from the population of loan applicants over a period of several months, until the desired sample size was achieved. Once a loan officer identified a potential marginal client, and following a short vetting process by the loan committee, the potential client was told that although he or she would normally not qualify for a loan, our MFI was reviewing its policies and as a result could offer a 50 percent chance of a loan provided that the applicant would agree to participate in a survey now and in a year's time. The loan officer also explained that the MFI would use the results of the study to decide how best to expand lending to this new client group on a permanent basis, meaning that marginal clients could continue to borrow as regular ones. This process continued until a total of 1,241 marginal applications were submitted to the loan committee. In total 1,196 of these marginal loan applicants were approved and interviewed. The interview lasted around 60 minutes and was conducted by a professional survey company using computer-assisted telephone interviews (CATI). This baseline survey was conducted after the individual was judged to be eligible for participation in the program but before the randomization. At the end of each week, the research team in London would use a random number generator to allocate newly interviewed applicants with a 50 percent probability to either the treatment (receiving a loan) or the control group (no loan). Successful applicants received the loan within a week. Applicants allocated to the control group did not receive a loan from our MFI for the duration of the study. The last interview and loan disbursal took place in May 2009. During February-July 2010, 14 months after the baseline survey, all RCT participants - both those who received a loan and those who did not - were called back and invited to be re-interviewed. We returned to those who declined and offered them an incentive (a mobile phone SIM card). This further improved the final response rate.
Experimental Design Details
In office with random number generation in Stata.
Was the treatment clustered?
Sample size: planned number of clusters
Sample size: planned number of observations
Sample size (or number of clusters) by treatment arms
600 treated, 600 control
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
INSTITUTIONAL REVIEW BOARDS (IRBs)
EBRD Technical Cooperation Committee (TC Com)
IRB Approval Date
IRB Approval Number
DTM Op ID 37742 and TCS Commitment ID 20346
Post Trial Information
Is the intervention completed?
Intervention Completion Date
July 31, 2010, 12:00 AM +00:00
Is data collection complete?
Data Collection Completion Date
July 31, 2010, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
Was attrition correlated with treatment status?
Final Sample Size: Total Number of Observations
Final Sample Size (or Number of Clusters) by Treatment Arms
Reports, Papers & Other Materials
We use an RCT to analyze the impact of microcredit on poverty reduction, child and teenage labour supply, and education. The study population consists of loan applicants to a major MFI in Bosnia who would have been rejected through regular screening. Access to credit allowed borrowers to start and expand small-scale businesses. Households that already had a business and where the borrower had more education, ran down savings, presumably to complement the loan and achieve the minimum investment amount. However, in less-educated households consumption went down. A key new finding is a substantial increase in the labor supply of children aged 16-19 year old together with a reduction in their school attendance, raising important questions about the unintended intergenerational consequences of relaxing liquidity constraints for self-employment and business creation or expansion.
REPORTS & OTHER MATERIALS