Informations et ressources scientifiques
sur le développement des zones arides et semi-arides

Innovations for Poverty Action

Titre : Graduating Microenterprises to SME‐Level Credit in Egypt

Région /Pays : Egypte

Date : 2016-2019

Résumé
Evidence suggests that microloans often fail to improve outcomes for borrowers, but providing micro-enterprises with larger loans may be more effective in helping them grow, while increasing business opportunities for microfinance lenders and reducing poverty. Identifying the most promising businesses to provide with these loans, however, is a barrier for financial institutions. In Egypt, researchers worked with the Alexandria Business Association (ABA) to evaluate the impact of providing qualifying microfinance clients with larger-than-usual loans, and used machine learning methods to examine the loans’ impacts on different groups of borrowers. The larger loans had small average impacts on business outcomes, but had large benefits for “top-performer” borrowers and left “poor-performer” borrowers worse off

Présentation
Previous research in low- and middle-income countries (LMICs) has found that microcredit often fails to substantially improve borrowers’ income or social well-being.[1] However, less evidence exists on the impact of larger loans. In theory, if the size of a microloan is too small to improve firm performance, then a larger loan could potentially help microenterprises and microfinance institutions grow. From the perspective of the borrower, lack of capital can impede investment, businesses growth and employment, so providing entrepreneurs with larger loans could support expansion of their business. Lenders, meanwhile, could increase their own profits by making larger loans, but have limited information about which enterprises are likely to benefit from such loans. This lack of information presents a risk for both lenders and borrowers : if lenders identify the wrong enterprises for large loans, recipients will be more likely to default and generate less profit. However, little evidence exists about the quality of lenders’ decision-making .

Taille de l’échantillon  : 1,004 enterprise loan borrowers

Innovation for Poverty Action (IPA)