The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence

This paper examines literature on the effects of microcredit, so as to assert that decisive statistical evidence in favor of microcredit is absent from these studies. It identifies the lack of clean quasi-experiments and the absence of randomized trials as the main reasons for this lack of evidence. It identifies authors that have prominently reinforced the advantages of microcredit in reducing poverty, benefiting women and the extremely poor. Although the paper does not contradict this view, it presents a list of randomized studies that found negative effects in some microfinance projects. Findings from the randomized studies raise questions about the value of non-randomized studies. The paper concludes that exclusive reliance on one type of study is not optimal. The quality of natural experiments must be very high for non-randomized studies to contribute to the study of causation in social systems.