Modifying Microcredit to Increase Outreach

Open Access
Author:
Kim, Boyoung
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • BEE-YAN ROBERTS, Thesis Supervisor
  • BRIAN DAVIS, Honors Advisor
Keywords:
  • Microcredit
  • outreach
  • developing countries
  • financial inclusion
  • financial access
  • loan maturity
  • loan term
  • loan structure
  • informal credit
  • formal credit
  • microfinance
  • Grameen Bank
Abstract:
Following the launch of microcredit in Bangladesh, economists have evaluated the progress made by microcredit organizations. This paper discusses measures of progress in terms of impact and outreach to those who lack financial access in developing countries. Literature shows mixed results on the impact of microcredit. Cases of entrepreneurial success and consumption smoothing benefits are not statistically relevant in poverty reduction measures. Furthermore, despite highlights of microcredit expansion from various microcredit providers, microcredit outreach still fails to reach over half of the world adult population. Based on an analysis of case studies and field experiments, this paper provides an overview of the factors of microcredit demand that could be incorporated into the conventional microcredit loan product to better serve the needs of the poor and to increase the demand of microcredit in developing countries. Connecting microcredit’s factors of demand found in literature, this paper concludes with a proposal of an experiment that may illuminate a new approach to increase outreach through shorter loan maturity.