Macroscale Microcredit and Constraints on Household Business Development: Evidence from Northern Thailand

This paper studies the impact of Thailand’s One-Million-Baht Village Fund program on easing constraints on business development for households in northern Thailand. The macroscale implementation of the Village Fund program provides sufficient exogenous variation in microcredit per household which, combined with our unique dataset, enables us to construct an instrument to estimate probit models that address endogeneity in borrowing decisions. We find evidence for positive impact on relieving financial constraints on household business expansion but no positive effects on new business startups. Our findings offer policy implications for enhancing the effectiveness of microfinance programs in fostering household business development.