Conditional Cash Transfers (CCTs) have been shown to increase human capital investments, but their standard features make them expensive. We use a large randomized experiment in Morocco to estimate an alternative government-run program, a “labeled cash transfer” (LCT): a small cash transfer made to fathers of school-aged children in poor rural communities, not conditional on school attendance but explicitly labeled as an education support program. We document large gains in school participation. Adding conditionality and targeting mothers made almost no difference in our context. The program increased parents’ belief that education was a worthwhile investment, a likely pathway for the results.
Seven randomized evaluations from around the world show that microcredit does not have a transformative impact on poverty, but it can give low-income households more freedom in optimizing the ways they make money, consume, and invest.
- Demand for many of the microcredit products was modest. In Ethiopia, India, Mexico, and Morocco, when MFIs offered loans to eligible borrowers, take-up ranged from 13 to 31 percent, which was much lower than partner MFIs originally forecasted.
- Expanded credit access did lead some entrepreneurs to invest more in their businesses. In Bosnia and Herzegovina and Mongolia, access to microcredit increased business ownership. All but one study showed some evidence of expanded business activity, but these investments rarely resulted in profit increases.
- Microcredit access did not lead to substantial increases in income. Despite some evidence of business expansion, none of the seven studies found a significant impact on average household income for borrowers.
- Expanded access to credit did afford households more freedom in optimizing how they earned and spent money.
- Six studies suggest that microcredit played an important role in increasing borrowers’ freedom of choice in the ways they made money, consumed, invested, and managed risk.
- There is little evidence that microcredit access had substantial effects on women’s empowerment or investment in children’s schooling, but it did not have widespread harmful effects either. Microcredit did not lead to increases in children’s schooling in the six studies in which it was measured, and only one of the four studies that measured women’s empowerment found a positive effect. Across all seven studies, researchers did not find that microcredit had widespread harmful effects, even with individual-liability lending or a high interest rate.
Compared to the number of randomized evaluations that have been conducted on cash transfers in Latin America, evaluations on cash grant interventions in African settings are few. However, the recent studies that have been conducted in Africa help to answer several key questions about cash grants.
Facilitating the purchase of a private water connection on credit improved households’ quality of life.
Connecting private dwellings to the water main is expensive and typically cannot be publicly financed. We show that households' willingness to pay for a private connection is high when it can be purchased on credit, not because a connection improves health but because it increases the time available for leisure and reduces inter- and intra-household conflicts on water matters, leading to sustained improvements in well-being. Our results suggest that facilitating access to credit for households to finance lump sum quality-oflife investments can significantly increase welfare, even if those investments do not result in any health or income gains.