We use an RCT to analyze the impact of microcredit on poverty reduction, child and teenage labour
supply, and education. The study population consists of loan applicants to a major MFI in Bosnia who
would have been rejected through regular screening. Access to credit allowed borrowers to start and
expand small-scale businesses. Households that already had a business and where the borrower had
more education, ran down savings, presumably to complement the loan and achieve the minimum
investment amount. However, in less-educated households consumption went down. A key new finding
is a substantial increase in the labor supply of children aged 16-19 year old together with a reduction
in their school attendance, raising important questions about the unintended intergenerational consequences
of relaxing liquidity constraints for self-employment and business creation or expansion.