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Promoting Inclusive Markets and Financial Systems

The Impact of Microcredit Loans on Child Outcomes: A review of the literature

Summary

The Impact of Microcredit Loans on Child Outcomes: A review of the literature

The subject of this literature review was to evaluate the existing literature regarding microcredit loans and their potential impacts on children of loan beneficiaries. A total of 754 abstracts were reviewed for inclusion; eventually 53 studies were included in analysis based on established criteria. The results of these studies primarily fell into three categories—education and cognitive development, health and nutrition, and child labor.

Findings related to children’s education and cognitive development, were overall mixed, depending on the category of impact measured. As a systematic review on the topic and a few studies included hypothesized, households may spend loan money directly on education-related expenses, improving short-term outcomes, but fail to improve the household’s overall financial standing. Other measures of education and cognitive development, including school attendance and enrollment, education gap for age, quality of schooling, and knowledge improvement, found mostly mixed results and no impact with a few studies able to demonstrate limited positive improvements for these indicators.

Health and nutrition findings on the other hand demonstrated mostly positive results. Measures of health care expenditures, health-care-seeking behaviors, food expenditures, consumption behaviors, and other measures of nutrition and food security as well as health status indicators overall showed that participation in microfinance initiatives leads to improvements in the health of children.  As for child labor, overall results were mixed; the vast majority of studies found no impact on child labor or mixed impacts, depending on the sub group analyzed. A number of studies found that with microcredit use comes an increase in the amount of household chores for children, a disproportionate number of which may be placed on girls within the household. This does have limited negative outcomes in schooling for girls in some studies with male-headed households or loan beneficiaries. However, overall this increase in chores was not directly related to a decrease in schooling among all children in the included studies.



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