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Putting microfinance to the test: 18-month impacts of the Grameen America Program (Quiroz Becerra et al. 2020)

Absence of conflict of interest.

Citation

Quiroz Becerra, M.V., Schaberg, K., Holman, D., & Hendra, R. (2020). Putting microfinance to the test: 18-month impacts of the Grameen America Program. New York: MDRC.

Highlights

  • The study's objective was to examine the impact of Grameen America on employment and earnings outcomes.
  • The study was a randomized controlled trial that assigned participants to either the treatment or control group. Using survey data, the authors conducted statistical analyses to compare outcomes between the treatment and control group 18 months after program enrollment.
  • The study found that 18 months after enrollment, women in the Grameen America group were more likely than women in the control group women to own businesses but less likely to be employed in wage-based positions.
  • This study receives a high evidence rating. This means we are confident that the estimated effects are attributable to Grameen America and not to other factors.

Intervention Examined

Grameen America

Features of the Intervention

The Grameen Bank microfinance (microlending) model to support low-income women entrepreneurs was first launched in Bangladesh in the 1970s.  In 2008, Grameen America opened a branch in Queens, NY. As of September 2018, there were 20 branches in 13 cities across the United States.

The Grameen model uses word-of-mouth and social networking to recruit participants, who are asked to form loan groups of five women, all of whom know each other, live close to each other, and operate or are interested in starting their own business. The groups complete a five-day course of training on business loans and each member is then eligible to apply for a small loan that she repays over about six months. Once all group members have repaid their initial loans, they can apply for subsequent loans. Multiple loan groups form "centers" that meet weekly to offer a forum for ongoing financial training, mutual aid, and loan payment collection. The intervention is designed to serve women whose incomes are below the federal poverty line and who operate or are interested in starting their own business.

Features of the Study

The study took place at Grameen America's Union City, NJ branch. The study used a randomized controlled trial to assign the loan groups to either the treatment or control condition. About 70 percent of the participants were assigned to the treatment group, and about 30 percent were assigned to the control group. Across all participants (1,492 participants in 300 loan groups), the average age at enrollment was 41 years old, average annual income was $18,655, and almost all (98.5%) identified as Hispanic/Latina. The treatment group received the planned intervention. Those assigned to the control condition did not receive any training or other services from Grameen America and were not eligible to apply for business loans from Grameen America.

The authors administered surveys 18 months after the women enrolled in Grameen America to assess employment and earnings outcomes. Among the survey completers, there were 805 treatment group members and 340 control group members. Study outcomes included engagement in business operation, engagement in standard employment, monthly business earnings, monthly employment earnings, past month individual net income, and past month household income. The authors conducted a statistical analysis to compare outcomes between the treatment and control groups 18 months after program enrollment.

Findings

Employment

  • The study found that women in the Grameen America group were more likely to report business ownership than women in the control group. However, women in the Grameen America group were less likely to report wage-based employment than women in the control group.
  • The study found that women in the Grameen America group were more likely to own a business but not be employed than women in the control group, but they were also less likely to only work for an employer (and not own a business).
  • The study also found that women in the Grameen America group were less likely than women in the control group to report that they neither owned a business nor were employed.

 Earnings and wages

The study did not find any significant differences between the Grameen America and control groups in earnings or net income.

Causal Evidence Rating

The quality of causal evidence presented in this report is high, because it is based on a well implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to Grameen America and not to other factors.

Reviewed by CLEAR

June 2022

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