Macroeconomic Effects of Microsavings Programs for the Unbanked This paper introduces a microsavings program for low wealth individuals in a general equilibrium model with heterogeneous agents. The model incorporates that (i) traditional banks require a minimum savings deposit size, causing some individuals to become “unbanked,” and (ii) banks and non-profits partner to offer microsavings programs to the unbanked. The paper shows that microsavings programs increase the percentage of entrepreneurs by providing collateral that the previously unbanked can use to start firms, and wages increase, which benefits workers. Second, government subsidies for microsavings programs expand the size and number of firms, but output and workers may decline when funding the program requires higher income taxes. Third, bank sector deregulation (i.e., lower transaction costs in the financial sector) leads to higher output per capita, wages, and firm numbers, and possibly lower income inequality among entrepreneurs. Finally, technological innovations that decrease deposit transaction costs, such as mobile banking, reduce funding pressure on microsavings programs, but have little effect on the percentage of entrepreneurs, firm size, entrepreneur returns or wages.
Microfinance in the U.S.with Anne Villamil This paper studies quantitatively how a microfinance program in the U.S. affects occupational choice, firm size, credit access, wages, output, inequality and welfare. The general equilibrium model has heterogeneous agents, a bank with a minimum loan size requirement and a microfinance institution (MFI) with a loan interest rate that exceeds the bank's. Four microfinance program policies are evaluated: alternative minimum loan size requirements, changes in the loan cost wedge (due to innovation or regulation), changes to the level of the government subsidy, and alternative MFI sustainability requirements. We find that MFIs can have significant welfare effects, ranging from 0 to 12 percent of consumption among relatively high ability but low wealth individuals.
Small Business Entrepreneurship Training and Financial Outcomes This paper measures the empirical effects of entrepreneurship training on small business financial outcomes using Women’s Initiative for Self-Employment (WISE) data for 1990 - 2014. Support for low-income microenterprises has grown in the U.S. from 108 to more than 800 organizations over the period 1992 - 2010. Like many microenterprise programs, WISE aimed to empower women enterprises by providing financial training and microfinance services. IV models, using the location of their preferred training center as an instrument, find evidence that the training has a positive effect on clients’ average sales, but a negative effect on household income one year after graduation as entrepreneurs use household income to invest in their business.