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Policy Insights in Finance

J-PAL’s Finance sector seeks to understand how access to financial services can reduce poverty and spur economic development by helping households smooth consumption, make investments, and manage risk. Our policy insights below summarize general lessons from randomized evaluations on increasing access to capital through microcredit and spurring self-employment through a multi-faceted approach for the extreme poor.

Dean Karlan (Northwestern University), Finance Chair

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Despite the fact that high-return investments seem to be available to low-income households in developing countries, these households have historically lacked access to loans and other financial services. Microcredit was initially designed to overcome the barriers preventing financial institutions from lending to the poor, but the traditional model does not have transformative impacts for the average borrower. Innovations to better target high-potential entrepreneurs and reduce the costs of delivering credit can help financial service providers better meet the needs of low-income borrowers.

Microcredit: impacts and limitations

Last updated: April 2018
Evidence from randomized evaluations in low- and middle-income countries shows that giving small loans in the form of microcredit did not lead to transformative impacts on income or long-term consumption on average, but it did help households better manage financial choices. Demand for many of the microcredit products was modest. People often used funds for consumption rather than entrepreneurial investments, suggesting that there were high non-entrepreneurial returns to credit. Innovations... Read More

Reducing the cost of lending to low-income borrowers

Last updated: April 2018
Product and market innovations that generate more information about borrowers, reduce transaction costs, and encourage repayment all address factors that contribute to the high cost of microcredit in low- and middle-income countries. Read More

Additional Insights

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Building stable livelihoods for the ultra-poor

Last updated: September 2015
A multifaceted livelihood program that provided ultra-poor households in seven low- and middle-income countries with a productive asset, training, regular coaching, access to savings, and consumption support led to large and lasting impacts on their standard of living. Read More

Sector Chairs

Headshot of Dean Karlan

Dean Karlan


Sector Contacts

Alison Fahey

Associate Director of Policy

[email protected]
(617) 324-6363

Samantha Carter

Senior Policy Associate

[email protected]
(617) 324-7691

Mikaela Rabb

Policy Associate

[email protected]
(617) 258-6021