Microfinance can raise incomes : evidence from a randomized controlled trial in the People's Republic of China

This study investigates the impacts of a government-led microcredit program in the People's Republic of China (PRC) which was implemented at scale in poor rural areas, using a randomized controlled trial (RCT). In contrast to recent RCT-based studies that found no evidence of significant increases in income from microcredit interventions, we find that the Chinese program significantly raises household income and reduces poverty. We explore possible explanations for why the estimated impacts may be greater in the PRC, including larger loan size, lump sum repayments, lower interest rates, less access to formal credit before the program, and greater returns from credit constrained off-farm employment opportunities.