Does microcredit improve wellbeing? Evidence from Indonesia

Purpose: This study aims to investigate whether microcredit programme has a positive impact on productive poors. Several areas of investigation include clients’ borrowing behaviour, level of savings and before-and-after psychological well-being comparison. Design/methodology/approach: A case-study survey of 398 clients of a microcredit programme run by a charity organisation in Jakarta, Indonesia, was conducted in 2012. Descriptive statistics and cross-tabulation analyses were then performed to show the variation of different variables among the respondents and how they correlate with socio-demographic indicators. Findings: The result shows an indication that microcredit brings positive impact on the clients’ welfare; however, the effect is not linear and there might be an optimum borrowing frequency. Moreover, the output also suggests that age, level of income and level of savings are three important determinant of borrowing behaviour. Research limitations/implications: Although the result can be justified, it is necessary to be cautious about its generalisability because of limited number of sample and non-randomised sample selection. Originality/value: Although the microcredit programme examined in this study has been operating since 2010, there is by far no comprehensive study to assess its impact on the welfare of the clients. This study attempts to fill in the gap by providing an analysis on how microcredit programme increases the welfare of the clients. In addition, as part of the continuous improvement programme, the study also identifies a number of factors that might indicate the clients’ borrowing behaviour.