The team find relatively high take-up rates for our two products (57% on average), and low default rates (under 5% for both contracts). Most importantly, researchers find large and significant effects from both treatments on business and household outcomes, using five rounds of follow-up data in the two years following this intervention.
Specifically, treatment clients are more likely to:
- remain in self-employment;
- have larger businesses (as measured through business assets);
- better business management practices (particularly in terms of inventory control and purchasing);
- and greater business performance (on average, an increase in monthly business profits of approximately 9% of the control group mean).
This generates a significant increase in household income (on average, approximately 8% per month), and a significant increase in household monthly consumption expenditure (approximately 6%). The bulk of this increased consumption is in household educational expenditure, where we observe a 26% average increase compared to the control group. This is predominantly driven by an increase in spending on girls’ education, significant across all measured subcategories: spending on school fees, books and materials, school meals, and transportation costs. The team also find significant positive effects on overall purchases of food for the household.
The researchers also estimate a dynamic structural model with non-convex capital adjustment costs, which rationalises the results. This highlights the potential for welfare improvements through large capital injections that are financially sustainable for microfinance institutions.