Research Summary
Research Summary
Individual Credit Constraints in Rural India (w/ Sendhil Mullainathan)
Description
Credit access for the poor has recently been given center stage in the international policy arena. A plethora of reports and case studies have emphasized the enormous returns that micro-businesses face: the Year of Microcredit website notes that studies conducted in India, Kenya and the Philippines found that the average annual return on investments by microbusinesses ranged from 117 to 847 per cent. These high returns are commonplace among microentrepreneurs. Hwever, there remains little empirical work on credit constraints at the household level: What fraction of individual households are credit constrained? How would additional credit be spent by these households? What are their returns to investment and how interest rate sensitive are they? In this forthcoming paper, we set out to consider these questions based on a series of randomized experiments in Tamil Nadu, India.