• Guido BALDI German Institute for Economic Research Department of Economics and Forecasting, Germany
  • Viktorija ŠIPILOVA Daugavpils University, The Institute of Social Research, Latvia


Microloans to small and medium-sized enterprises have become popular in many countries. However, evidence on the economic and social impact of microfinance is scarce. In an attempt to partly fill this gap, this paper looks at a case study and analyzes the economic impacts of the microloan programme of the Latvian development bank Hipoteku Banka. In our analysis, we focus on the following questions: Did the microloan programme increase employment within the supported firms? And was it able to contribute to the economic development of rural areas and the decrease of economic inequalities across regions? We find that the firms that were granted a loan from Hipoteku Banka on average considerably increased their employment during the loan period, as well as the microloan programme made a successful contribution to the economic development of rural regions in Latvia.


[1] Attali, J. (2012). The new challenges of microcredit. In: OECD Year Book 2012: Better Policies for Better Lives, OECD Publishing. pp. 72-73.
[2] Armendáriz, B., Morduch, J (2010). The Economics of Microfinance, MIT Press, 2nd Edition, Massachusets.
[3] Baldi, G. (2013). Physical and Human Capital Accumulation and the Evolution of Income and Inequality, Journal of Economic Development, 38(3): 57-83.
[4] Banerjee, A., Duflo, E. (2009). The Experimental Approach to Development Economics, Annual Review of Economics, Annual Reviews, 1(1): 151-178.
[5] Bateman, M., Chang, H-J. (2013). The Microfinance Illusion. Available at: faculty/chang/pubs/Microfinance.pdf
[6] Bateman, M. (2010). Why Doesn't Microfinance Work? The Destructive Rise of Local Neoliberalism. Zed Books Ltd, London.
[7] Beck, T., Demirguc-Kunt, A., Levine, R. (2005). SMEs, Growth, and Poverty: Cross-Country Evidence. Journal of Economic Growth, 10(3): 199-229.
[8] Beck, T., Demirguc-Kunt A., Honohan, P. (2009). Access to Financial Services: Measurement, Impact, and Policies. World Bank Research Observer, Oxford University Press, 24(1): 119-145.
[9] Bendig, M., Unterberg, M., Sarpong, B. (2012). European Microfinance Network 2010-2011. Overview of the Microcredit Sector in the European Union. Available at: overview2010-2011-final.pdf
[10] Brown, A. (2013). 5 Lessons in Microfinance from Eastern Europe. Available at: http://europe.
[11] Komisare, L. (2013). “Capitalia” pirmie Baltijas valstīs iziet uzņēmumu mikrokreditēšanas apmācības kursu, saņemot atbalstu no Eiropas Investīciju fonda. Available at: fin/item/2013010314200002EED306B7C47C0B2A/?phase=mikrokredit%C4%93%C5%A1ana
[12] Cull, R., Demirguc-Kunt, A., Morduch, J. (2009a). Banks and Microbanks. Policy Research Working Paper, Series 5078, The World Bank.
[13] Cull, R., Demirguc-Kunt, A., orduch, J. (2009b). Microfinance tradeoffs: regulation, competition, and financing, Policy Research Working Paper Series 5086, The World Bank.
[14] De Soto, H. (2000). The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. Basic Books, 1st edition.
[15] Eriksson, P-E, Krämer-Eis, H., Conforti A. (2011). Microfinance in Europe, in: APS Bank Occasional Papers, 10: 49-86.
[16] Guiso, L., Sapienza P., Zingales, L. (2004). Does Local Financial Development Matter? The Quarterly Journal of Economics, 119(3): 929-969.
[17] King, R., Levine, R. (1993). Finance and Growth: Schumpeter Might Be Right. The Quarterly Journal of Economics, 108(3): 717-37.
[18] Loncar, D., Novac, C., Cicmil, S. (2013). Global recession and sustainable development: the case of microfinance industry in Eastern Europe. Available at: http://www.microfinancegateway. org/gm/document-1.9.39138/MICROFINANCE%20PAPER-%20FINAL%20VERSION.pdf
[19] Vanroose, A., D’Espallier, B. (2013). Do microfinance institutions accomplish their mission? Evidence from the relationship between traditional financial sector development and microfinance institutions’ outreach and performance. Applied Economics, 45(15): 1965-1982.
[20] Vento, G. (2011). Recent Trends in Microfinance Industry: Regulation, Supervision, and the Principles of the Basel Committee. In: Microfinance Regulations for Development: Global Experiences (eds. I. Rahman and L. Rashid), The University Press Ltd.
*** Bank for International Settlements (BIS) (2010). Microfinance activities and the Core Principles for Effective Banking Supervision. Basel, August 2010.
*** BNS (2011). Pētījums: mikrokreditēšana Latvijā līdz šim nav uzskatīta par būtisku atbalsta instrumentu uzņēmējdarbības veicināšanai. Available:
*** Central Statistical Bureau of Latvia (2013). Gross Domestic Product by Statistical region, City and District (NACE Rev.2). Available at:
*** Central Statistical Bureau of Latvia (2013). Population by Labour Status and Statistical Region. Available at:
*** CGAP and MIX (2010). Eastern Europe and Central Asia Microfinance Analysis and Benchmarking Report 2010, Washington.
*** Eiropas Komisija (2013). Mikrofinansēšanas instruments. Available at: langId=lv&catId=836
*** European Commission (2010). Gaining Scale in Microcredit: Can Banks Make it Happen? Luxembourg.
*** Florida State University. Department of Urban and Regional Planning. Planning Methods III: Forecasting (2013) Location Quotient Technique. Available at: topics/econbase/lq.htm
*** Hipotēku Banka (2006). Jauna, kompleksa ALTUM apmācību un atbalsta programma cilvēkiem, kuri vēlas uzsākt savu biznesu. Available at: jaunumi/jauna_kompleksa_altum_ apmacibu_un_atbalsta_programma_cilvekiem_kuri_velas_uzsakt_savu_biznesu
*** Hipotēku Banka (2013). Mikrokreditēšanas programma. Available at: programmas/mikrokreditesanas_programma
*** Ministru Kabinets (2009). Koncepcija par mikrouzņēmumu atbalsta pasākumiem. Available at:
How to Cite
BALDI, Guido; ŠIPILOVA, Viktorija. HOW BIG ARE THE EMPLOYMENT EFFECTS OF MICROLOANS? EVIDENCE FROM A CASE STUDY IN LATVIA. Theoretical and Practical Research in the Economic Fields, [S.l.], v. 5, n. 1, p. 17-31, june 2017. ISSN 2068-7710. Available at: <>. Date accessed: 23 jan. 2022. doi: