Measuring the Impact of Microcredit
with Counterfactual Impact Evaluations
Microcredit aims at providing access to finance and support to micro-entrepreneurs who are otherwise excluded from the conventional credit market. Microcredit is thus expected to boost self-employment and fight social exclusion. Confronting the expected and actual impacts is critical to understand if microcredit is meeting its objectives. In that context, Counterfactual Impact Evaluations (CIE) is a very useful tool as it allows to quantify the net impacts of the microcredit on its final beneficiaries.
More precisely, a CIE consists in comparing the outcomes of interest (e.g. business activity, business survival, labour market outcomes) of beneficiaries of microcredit (the “treatment group”) with those of a group similar in all respects to the treatment group (the “comparison group”), except that it has received a microcredit (rejected applicants for instance). The comparison group informs us on what would have happened to the members of the group subject to the policy intervention (final beneficiaries of microcredit) if they had not been exposed to it (the counterfactual state).
Comparing the outcomes of the treated and comparison groups is the only way to provide quantitative evidence that the microcredit is having the desired impact.
The objective of the workshop will be to:
- Review the main CIE methods in the context of microcredit
- Randomized control trials
- Differences in differences
- Propensity Score Matching
- Regression Discontinuity Design
- Discuss data collection requirements for CIE
The workshop will end with a discussion with the microfinance providers so as to understand their possible interests in collaborating with scholars of the Joint Research Centre of the European Commission to carry out a CIE.