The Impacts of Microfinance: Evidence from Joint-Liability Lending in Mongolia

TLDR

The study evaluates the poverty impacts of a joint‑liability microcredit program for women in rural Mongolia. A randomized field experiment assigned households to receive group loans or individual loans, measuring outcomes such as female entrepreneurship, food consumption, and income. Group loans increased female entrepreneurship and household food consumption but did not raise working hours or income, while individual loans had no significant effects and joint liability may reduce noninvestment use without affecting repayment rates. JEL codes: G21, I32, I38, J16, L26, O15, O16.

Abstract

We present evidence from a randomized field experiment in rural Mongolia to assess the poverty impacts of a joint-liability microcredit program targeted at women. We find a positive impact of access to group loans on female entrepreneurship and household food consumption but not on total working hours or income in the household. A simultaneously introduced individual-liability microcredit program delivers no significant poverty impacts. Additional results on informal transfers to families and friends suggest that joint liability may deter borrowers from using loans for noninvestment purposes with stronger impacts as a result. We find no difference in repayment rates between both types of microcredit. (JEL G21, I32, I38, J16, L26, O15, O16)