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Does Microfinance Work as a Recovery Tool After Disasters? Evidence from the 2004 Tsunami

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  • Becchetti, Leonardo
  • Castriota, Stefano

Abstract

Summary We evaluate the effectiveness of microfinance as a recovery tool after tsunami by testing the impact of an equity injection from foreign donors which recapitalizes a Sri Lankan MFI and allows it to refinance borrowers seriously damaged by the calamity. We find that loans obtained from the MFI after the catastrophic event have a positive and significant effect on the change in real income and in weekly worked hours, and that the impact on performance variables is significantly stronger for damaged than non-damaged borrowers. Results hold after controlling for selection effects and for heterogeneity in both the timing of the intervention and the characteristics of treatment and control samples.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 39 (2011)
Issue (Month): 6 (June)
Pages: 898-912

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Handle: RePEc:eee:wdevel:v:39:y:2011:i:6:p:898-912

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Web page: http://www.elsevier.com/locate/worlddev

Related research

Keywords: Asia Sri Lanka tsunami natural catastrophe crisis recovery microfinance;

References

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  1. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
  2. Deaton, A. & Paxson, C., 1997. "Economies of Scale, Household Size, and the Demand for Food," Papers 178, Princeton, Woodrow Wilson School - Development Studies.
  3. Prema-chandra Athukorala & Budy P. Resosudarmo, 2005. "The Indian Ocean Tsunami: Economic Impact, Disaster Management and Lessons," Departmental Working Papers 2005-05, The Australian National University, Arndt-Corden Department of Economics.
  4. Niels Hermes & Robert Lensink, . "The empirics of microfinance: what do we know?," ULB Institutional Repository 2013/14198, ULB -- Universite Libre de Bruxelles.
  5. Fafchamps, Marcel & Gubert, Flore, 2007. "The formation of risk sharing networks," Journal of Development Economics, Elsevier, vol. 83(2), pages 326-350, July.
  6. Skees, Jerry & Varangis, Panos & Larson, Donald & Siegel, Paul, 2002. "Can Financial Markets be Tapped to Help Poor People Cope with Weather Risks?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Shahidur R. Khandker, 2007. "Coping with flood: role of institutions in Bangladesh," Agricultural Economics, International Association of Agricultural Economists, vol. 36(2), pages 169-180, 03.
  8. Hoque, Serajul, 2008. "Does Micro-credit Program in Bangladesh Increase Household’s Ability to Deal with Economic Hardships?," MPRA Paper 6678, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Leonardo Becchetti & Stefano Castriota & Pierluigi Conzo, 2012. "Calamity, Aid and Indirect Reciprocity: the Long Run Impact of Tsunami on Altruism," CEIS Research Paper 239, Tor Vergata University, CEIS, revised 06 Jul 2012.
  2. Leonardo Becchetti & Stefano Castriota & Pierluigi Conzo, 2012. "Bank Strategies in Catastrophe Settings: Empirical Evidence and Policy Suggestions," CSEF Working Papers 324, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  3. Berg, Gunhild & Schrader, Jan, 2012. "Access to credit, natural disasters, and relationship lending," Journal of Financial Intermediation, Elsevier, vol. 21(4), pages 549-568.
  4. Conzo, Pierluigi, 2014. "Trust and Cheating in Sri Lanka: The Role of Experimentally-Induced Emotions about Tsunami," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201403, University of Turin.

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