[VIDEO] Microfinance Can Raise Incomes: Evidence from a Randomized Controlled Trial in China

This study investigates the impacts of a government-led microcredit program in China which implemented at scale in its poor rural areas with a randomized controlled trial (RCT). In contrast to recent RCT-based studies that have failed to find evidence of significant increases in income from microcredit interventions, we find that the Chinese program significantly raises household income and reduces poverty. We explore possible explanations as to why the estimated impacts may be greater in China: lump-sum repayments, lower interest rates, less access to formal credit before the program, and greater potential returns from off-farm employment opportunities that are credit-constrained.