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Microfinancial Services And Risk Management: Evidences From Sri Lanka

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  • MIRKO BENDIG

    (German Institute of Global and Area Studies)

  • THANKOM ARUN

    () (The University of Central Lancashire)

Abstract

This paper examines the importance of financial services as risk coping mechanisms in Sri Lanka, while insurance and savings products function as ex-ante, i.e., preventive, strategies for consumption smoothing, credit is typically used as an ex-post risk coping strategy. Based on household survey data, it estimates the determinants of the household¡¯s use of one, two or all three types of microfinancial services and for different combinations of financial services applying ordered probit models. There is empirical evidence that household¡¯s probability to participate in microfinancial services increases with rising self perception towards risk. Further, it depends highly on the type of risk, if a household is more or less likely to use microfinancial services, whereas the accessibility to one, two or three microfinancial services are related to the experience of specific hazards in the past. In confirmation with earlier findings, the poor are less likely to use microfinancial services than their better-off counterparts.

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Bibliographic Info

Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 36 (2011)
Issue (Month): 4 (December)
Pages: 97-126

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Handle: RePEc:jed:journl:v:36:y:2011:i:4:p:97-126

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Related research

Keywords: Financial Markets; Financial Services; Microinsurance; Sri Lanka; South Asia;

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References

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  1. Zeller, Manfred & Meyer, Richard L., 2002. "The triangle of microfinance," Food policy statements 40, International Food Policy Research Institute (IFPRI).
  2. Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, vol. 53(2), pages 339-371, August.
  3. Marcel Fafchamps & Chris Udry & Katherine Czukas, . "Drought and Saving in West Africa: Are Livestock a Buffer Stock?," Working Papers 97013, Stanford University, Department of Economics.
  4. Sharma, Manohar, 2000. "Microfinance," MP05 briefs 0, International Food Policy Research Institute (IFPRI).
  5. Mikkel Barslund & Finn Tarp, 2007. "Formal and Informal Rural Credit in Four Provinces of Vietnam," Discussion Papers 07-07, University of Copenhagen. Department of Economics.
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  7. Siegel, Paul B. & Alwang, Jeffrey & Canagarajah, Sudharshan, 2001. "Viewing microinsurance as a social risk management instrument," Social Protection Discussion Papers 23305, The World Bank.
  8. Navajas, Sergio & Schreiner, Mark & Meyer, Richard L. & Gonzalez-vega, Claudio & Rodriguez-meza, Jorge, 2000. "Microcredit and the Poorest of the Poor: Theory and Evidence from Bolivia," World Development, Elsevier, vol. 28(2), pages 333-346, February.
  9. Jain Nishant & Bhat Ramesh, . "Factoring affecting the Demand for Health Insurance in a Micro Insurance Scheme," IIMA Working Papers WP2006-07-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
  10. Lena Giesbert & Susan Steiner & Mirko Bendig, 2011. "Participation in Micro Life Insurance and the Use of Other Financial Services in Ghana," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 78(1), pages 7-35, 03.
  11. Tamás Bartus, 2005. "Estimation of marginal effects using margeff," Stata Journal, StataCorp LP, vol. 5(3), pages 309-329, September.
  12. Gupta, K L, 1970. "Personal Saving in Developing Nations: Further Evidence," The Economic Record, The Economic Society of Australia, vol. 46(114), pages 243-49, June.
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