The microcredit movement has been built on the assumption that the poor need credit to invest in microenterprises, which will help them get out of poverty. Household survey data from Indonesia suggest otherwise, with substantial use of microcredit for consumption rather than investment purposes.
The authors, Don Johnston and Jonathan Murdoch, also find a large degree of credit aversion even among households that were considered credit worthy by microcredit officials. This paper was presented at a recent conference on Access to Finance.
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