【主 题】Can Microcredit Program Crowd out Informal Financial Networks? Evidence from a Randomized Controlled Trial in China
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This study finds crowding out effects of a microcredit program on informal financial networks of smoothing consumption among households in China based on a randomized controlled trial. The results show that the informal loans decrease substantially for both borrowers and non-borrowers of the program loans as a result of randomly assigned microcredit program to the village. Further analysis suggests the microfinance program reduces the effect of informal financial networks on consumption smoothing. The access to financial inclusion weaken other forms of social interaction as well in the long run. These results are consistent with a two-period model of households’ decisions under liquidity constraints. Expecting to take loans from the microcredit program in the second period, the households reduce savings for investment in the future. This enhances their capability to smooth consumption by self-financing; thus, they rely less on informal financial networks.