When Microenterprises Grow, Are Consumers Better Off? Evidence from Large Loans to Microenterprises in Chile

Evaluations of microenterprise credit typically measure effects only on borrowing firms. But what about their customers? If microenterprises sell relatively undifferentiated goods and services, as is often hypothesized, credit may simply reallocate sales across firms and create little consumer benefit. In a randomized controlled trial in Chile, large loans increased treated firms’ profits by USD 292 per month, a 13.4% increase. Customer survey data indicate even larger benefits for customers: a gain of USD 494 per month in consumer surplus. Furthermore, using a sample of more than 125,000 non-treated firms operating in the same markets, we find little evidence of business stealing. The welfare gains from credit expansion thus extend well beyond the borrowers themselves.