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The impact of informal credit on household welfare: evidence from rural Ethiopia

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  • Habitamu Asifawu Tonch
  • Wook Sohn

Abstract

This study focuses on a credit-related informal risk-sharing mechanism and analyzes the effect of informal credit on household welfare. We use two-stage least squares regression to avoid the endogeneity problem and the Heckman correction procedure to remove possible self-selection bias. We find that informal credit is positively associated with welfare; each thousand Ethiopian Birr (approximately US$ 28) received in the form of informal credit improves the welfare expenditure of a household by approximately 4.3%.

Suggested Citation

  • Habitamu Asifawu Tonch & Wook Sohn, 2022. "The impact of informal credit on household welfare: evidence from rural Ethiopia," Applied Economics Letters, Taylor & Francis Journals, vol. 29(1), pages 12-16, January.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:1:p:12-16
    DOI: 10.1080/13504851.2020.1854662
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    Cited by:

    1. Shoumin Yue & Ying Xue & Jie Lyu & Kangkang Wang, 2023. "The Effect of Information Acquisition Ability on Farmers’ Agricultural Productive Service Behavior: An Empirical Analysis of Corn Farmers in Northeast China," Agriculture, MDPI, vol. 13(3), pages 1-26, February.
    2. Akinwumi Sharimakin, 2023. "Microfinance bank in Nigeria: operating environment, sustainability, and welfare impact," SN Business & Economics, Springer, vol. 3(10), pages 1-27, October.

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