A Structural Evaluation of a Large-Scale Quasi-Experimental Microfinance Initiative

This paper uses a structural model to understand, predict, and evaluate the impactof an exogenous microcredit intervention program, the ThaiMillion Baht Village Fundprogram. We model household decisions in the face of borrowing constraints, incomeuncertainty, and high-yield indivisible investment opportunities. After estimation ofparameters using pre-program data, we evaluate the model’s ability to predict andinterpret the impact of the village fund intervention. Simulations from the modelmirror the data in yielding a greater increase in consumption than credit, which isinterpreted as evidence of credit constraints. A cost-benefit analysis using the modelindicates that some households value the program much more than its per householdcost, but overall the program costs 20 percent more than the sum of these benefits.