Microfinance in the U.S

Fan Liu; Anne Villamil

doi:10.1007/s00199-025-01675-z

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Journal article

Peer reviewed

Microfinance in the U.S

Fan Liu and Anne Villamil

Economic theory, Vol.81, pp.1131-1173

06/2026

DOI: 10.1007/s00199-025-01675-z

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Abstract

This paper studies quantitatively how a microfinance program in the U.S. affects occupational choice, credit access, wages, output, inequality, and welfare. The general equilibrium model has heterogeneous agents, a bank with a minimum loan size requirement, and a microfinance institution (MFI) with a loan interest rate that exceeds the bank’s. Four microfinance program policies are evaluated: alternative minimum loan size requirements, changes in the loan cost wedge (due to innovation or regulation), changes to the level of a government subsidy, and alternative MFI sustainability requirements. We find that MFIs can have significant welfare effects for some individuals, ranging from zero to 12% of consumption among high ability but low wealth individuals.

Entrepreneurship

Microcredit

Microfinance Institutions

Credit Constraints

Occupational Choice

Heterogeneity

G21

G28

O16

Details

Title: Subtitle: Microfinance in the U.S
Creators: Fan Liu - Xi’an Jiaotong-Liverpool University
Anne Villamil - University of Iowa
Resource Type: Journal article
Publication Details: Economic theory, Vol.81, pp.1131-1173
DOI: 10.1007/s00199-025-01675-z
ISSN: 0938-2259
eISSN: 1432-0479
Publisher: Springer
Language: English
Electronic publication date: 08/21/2025
Date published: 06/2026
Academic Unit: Economics
Record Identifier: 9984949225502771

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