Reference no: EM131917481

Problem

1. Consider a village where all households are eligible for a loan from a microfinance enterprise. Suppose that half of those households borrow from a microfinance enterprise, and that half of them do not borrow at all. The total number of children of participant borrower households is 119 and the number of nonparticipants is 143. Before borrowing from a microfinance enterprise, the number of participant borrowers' children enrolled at school was 51, and of nonparticipants was 71. After joining the microfinance program, the number of children in school of program participants increased to 65, which in turn made the nonparticipants increasingly inclined to send their children to school. Suppose that, on average, for every two additional children that participants in the microfinance program send to school, there is a spillover effect of one additional child from the nonparticipant group who will go to school. Compute the percentage of children that go to school in both the participant and nonparticipant groups once the microfinance program has been set up, assuming that the birth rate in the village throughout the duration of the program is 5 percent. Then evaluate the merits of the following statement: "Microfinance has no effect on education," and explain your answer.

2. Provide and explain at least three reasons why statistical evaluations of microfi nance programs might be unsound.