especially beneficial to women as they tend to be less-educated, lack appropriate forms of collateral, and have less work experience, among other things.

# _Targeting women_

In many cases, microcredit institutions explicitly target poor women. Largely as a result of this choice, women constitute over 80 percent of the client membership for the 34 largest microcredit institutions around the world (Mody 2002 as cited in Armendariz de Aghion and Morduch 2003). The reasons why microlenders target women are myriad but, as discussed by McKernan et al. (2005), they typically consist of some combination of the following four reasons. First, women appear to be better clients rather than men (at least unconditionally) as demonstrated by their higher repayment rates (see, e.g., Hossain 1988, Khandker et al. 1995, and Hulme 1991 for specific examples). This may be related to the fact that, relative to men, women often have fewer alternative options and may be more sensitive to the social consequences of defaulting on their loans under group lending contracts (see Johnson 2004 for a discussion of shame and repayment in rotating savings and credit associations in Kenya). Second, as women are often more credit-constrained than men, women are considered to be relatively more economically disadvantaged and vulnerable to negative shocks. Third, the provision of microcredit directly to women is considered to increase their economic and social empowerment both within the household and in the community at large, which is valued both intrinsically and instrumentally. Fourth, consistent with a collective household model characterization of intrahousehold decisionmaking, the preferences of women are thought to be more in line with the microlender’s social objectives; thus, targeting women is considered to have a greater positive impact on household welfare outcomes.

# _Differential welfare effects by gender_

As mentioned before, a large number of studies find that microcredit programs, many of them who provide most, if not all, their loans to women, have significant positive effects on a range of welfare outcomes. While these studies do not directly answer the question of whether the effect of credit differs by the gender of the direct beneficiary, a growing number of studies show that when women are the direct beneficiaries of credit rather than men, the impact of credit on various measures of household welfare is greater, suggesting that credit may not be perfectly fungible within the household.

The most reliable evidence of these differential effects come from careful studies of Grameen Bank and other microcredit programs in Bangladesh. Using a quasi-experimental design where they correct for non-random program placement and self-selection in program participation, Pitt and Khandker (1998) find that when credit is provided directly to the woman, it has a significant positive effect on consumption expenditure, children’s schooling, and her labor supply; when credit is provided directly to the man, it only has a significant positive effect on male children’s schooling. Specifically, they find that, at the mean, an additional 100 taka of credit provided to the woman increases total annual per capita household consumption expenditure by 18 taka, while the corresponding increase when credit is provided to the man is 11 taka. Given the positive albeit small effect of the woman’s credit on her labor supply, the authors posit that the 17