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The Macroeconomics Of Microfinance

This paper provides a quantitative evaluation of the aggregate and distributional impacts of economy-wide microfinance or other size-dependent credit programs targeted toward small-scale entrepreneurs. In the authors' quantitative analysis, they find that making the typical microfinance program more widely available has a negligible impact on per-capita income. While microfinance has a positive impact on Total Factor Productivity (TFP), it has a large negative effect on capital accumulation by redistributing income from individuals with high saving rates to those with low saving rates. Programs that offer larger-scale credit can avoid this effect and lead to growth in the stock of capital, TFP, and output per capita.

Provided by: University of Notre Dame Topic: CXO Date Added: Oct 2010 Format: PDF

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