Impact of microcredit on performance of women-owned non-farm microenterprises

Abstract

This study evaluates microcredit outcomes in Uganda, where non-farm enterprises are critical for complementing farming incomes and diversifying livelihoods. It investigates the effects of microcredit on the performance of non-farm microenterprises (MEs) run by female small-holder farmers, using quasi-experimental cross-sectional and panel designs. The average loan amount was $278, while the monetary worth of MEs for old borrowers (OBs) and new borrowers (NBs) were $280 and $184, respectively. Propensity score matching (PSM) revealed a 24% and 47% increase in funds used to restock and in ME monetary value, respectively, but no differences in ME profits. Difference-in-difference analysis (DiD) over 1 year showed improvements in ME monetary value and employee numbers but no effect on profits, trade expenses, or restocking. Across both methods, no improvement in ME profit levels was observed. However, the increase in monetary worth suggests potential profit growth over time. The borrowing context, repayment terms, and the type and size of MEs appeared to limit profitability. This study highlights the importance of understanding microcredit impacts in contexts where non-farm enterprises are pivotal to rural livelihoods.