Senior Research Associate - J-PAL South Asia

About the project:

Around the world, millions of microentrepreneurs rely on sources of informal credit at exorbitant interest rates. In Erode, India, one of our study locations, the Yale University Economic Growth Center – Center for Microfinance Tamil Nadu Panel Survey reports 13% of urban and 39% of rural households borrowing at a monthly interest rate above 5%. However, evidence also suggests microentrepreneurs may be able to access loans with lower interest rates, yet still choose to use informal sources of credit from moneylenders and suppliers because they are more easily able to match the timing of their (often uncertain) cash flows.

The study seeks to understand how lower-interest, formal loans that also offer less rigid repayment schedules impact the business performance and welfare of microentrepreneurs. To do so, the researchers evaluate the impact of such a loan currently being offered by Sanghamithra Rural Financial Services, our partner MFI in India....