Microfinance Credit Inelasticity in Transnational Households
Microfinance interventions frequently operate under the assumption that low-income households are constrained by a lack of formal credit for enterprise development. Establishing whether transnational households actually demand formal group microloans is necessary before scaling credit access programs.
Picture this
Imagine a small store owner who already receives steady financial support from a relative working abroad. If a local bank offers them a high-interest business loan requiring rigid monthly repayments, they will pass on the loan offer because borrowing money creates debt risk when they already have access to reliable family funds.
What the evidence says
Only 2 out of 438 offered individuals took up the microloan product (~0.46% take-up rate), yielding regression coefficients statistically indistinguishable from zero.
- Who
- N = 438 transnational household heads in Cabanatuan City and surrounding localities, Philippines.
- How
- Four-arm randomized controlled trial offering formal enterprise development microloans (ASKI microloans ranging from PHP 30,000 to 300,000 at 3% interest).
What to do
Assess baseline household remittance inflows and liquidity before deploying subsidized microcredit programs targeted at migrant families.
From the source
"Only nine individuals ended up opening BPI savings accounts, and only two took up the ASKI credit product. Regression coefficients in the credit regression are all very small in magnitude and not statistically significantly different from zero."
Financial Education and Financial Access for Transnational Households: Field Experimental Evidence from the Philippines
Tagged
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