Evaluating Microcredit Using Randomized Controlled Experiments

Open Access
Author:
Hite, Kathryn Elaine
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Bee Yan Roberts, Thesis Supervisor
  • David Shapiro, Honors Advisor
Keywords:
  • microcredit
  • economics
  • randomized controlled experiments
  • Grameen Bank
Abstract:
Poverty is an issue that plagues almost one-fifth of the world’s population. Microcredit was presented as a potential solution. Microcredit is a subdivision of microfinance lending which provides small monetary loans and education to disadvantaged populations. The intent of my thesis is to examine microcredit as an institution using data collected from randomized controlled experiments. My research addresses the key characteristics of microcredit including group lending and the emphasis on female involvement. I will present both praises and criticisms of the institution. I will continue to outline the process of a randomized controlled experiment, and present both the benefits and the challenges of using this method to conduct research. I conclude that the most effective way to determine whether or not a cause and effect relationship exists between a treatment and a result is to use a randomized controlled experiment. I then present archival data from four randomized studies done on microcredit. I identified four categories in which positive change must be found for microcredit to be determined a successful means for ending poverty. Ultimately, I concluded that microcredit as it stands today provides assistances to borrowers, but not ones that are enough to bring them above the poverty line. Microcredit is useful in several aspects, but there is definitely room for improvement.