Agenda, Scope, and Goals
Despite the widespread implementation of microfinance programs throughout the world, there is limited rigorous evidence on the model’s effects on loan recipients’ employment, income, poverty reduction, and other outcomes, particularly in advanced economies. The rigorous evidence that is available (which is mostly from international studies) shows that microfinancing can lead to modest positive impacts on some outcomes for some groups. However, it is unclear whether those results can be generalized to other contexts, such as the United States.
Grameen America provides microloans to low-income female entrepreneurs through a group-lending model. All individuals who receive a loan must have a business purpose for the loan, which can be an existing business or a new venture. While members of a loan group cannot receive larger loans unless all group members are current on their loans, they are individually responsible for repaying their own loans. To overcome some of the limitations observed in previous studies, the evaluation conducted by MDRC randomized intact lending groups to maximize the difference in take-up of microloans between the program and control groups. This represented an increased challenge for recruitment, but it set the study up for a larger treatment contrast, thus providing a fairer test of the group-lending model than some previous studies.