MDRC published an RCT of @GrameenAmerica microfinance program in Union City NJ, providing low-income women with small loans & training to start or expand a business. Quick take: High-quality RCT finds modestly encouraging gains in economic well-being at the 3 year mark.

Program:  

• A woman finds 4 people she trusts to form a group; groups receive training in loans, savings, credit building; individual group members receive a small loan to start or build a business; groups meet weekly to make repayment, continue education & build support networks.

Study Design:

• The study randomly assigned 300 groups of low-income women (1,492 individuals) to treatment vs control. 99% were Hispanic & 91% were born outside US. Based on careful review, the study was well conducted (e.g., good baseline balance, modest & nondifferential attrition).

Findings:

• Impact on the 2 primary outcomes, at 3yr mark: (1) a modest (13%) gain in net income that fell short of statistical significance (p=0.101) so is encouraging but not definitive; (2) a statistically significant decrease in types of material hardship experienced (0.9 T vs 1.1 C).

• The study also found statistically significant or near-significant effects on some key secondary outcomes at 3 years - for example: (i) 87% T vs 75% C owned a business; (ii) 68% T vs 60% C were very satisfied with life; (iii) 40% T vs 47% C experienced any material hardship in past year.

Comment:

• A modest study weakness is that key outcomes were measured via surveys, which are vulnerable to social desirability bias (e.g., T group overstating outcomes to show they've made good use of Grameen's assistance). Future corroboration with administrative data would be desirable.