Microfinance Duration and Development : The Case of Three Cities in India

This paper uses a quasi-randomized control design combined with observational methods to evaluate the impact of a microcredit duration on the welfare of clients of a microcredit organization in western India. We survey respondents from three cities, Mumbai, Pune, and Satara, to understand the impact of microcredit on both pecuniary and non-pecuniary dimensions of their wellbeing, informed by a hierarchy-of-needs, multi-dimensional, approach to the concept of development. Our measures of impact include monetary dimensions such as income generation and saving, and psychosocial dimensions of wellbeing, relating to social capital, that can form due to group liability structure of loans given to borrowers. We find a positive impact overall of the length of time microcredit is received on income generation, and indirectly on saving, in the complete sample of clients. However, individual samples of the cities show mixed evidence with the strongest positive impact in Pune driving the overall results. Outcomes concerning social capital are also mixed as well as different relative to previous literature; whether microfinance impacts positively on these dimensions depends on the type of social capital and its level of development. Instances of positive impact are again greater in Pune relative to other cities