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Long-term benefits of membership in microfinance programmes

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Author Info
Nidhiya Menon (Department of Economics & International Business School, Brandeis University, Waltham, MA, USA)
Abstract

This study studies the benefits of membership in microfinance programmes, and examines whether membership in these programmes is an effective instrument in smoothing inter-seasonal consumption. We hypothesise that the benefits to participation accrue differentially over time, as more experienced participants are better equipped on their own to minimise per capita consumption fluctuations. Using an Euler equation approach, we show that consumption differentials across seasons are inversely related to length of membership. Estimates from the gender-stratified model suggest that for a female participant, 1 year of membership reduces the percentage change in per capita consumption, caused by a unit shock, by 6 per cent. We present simulation results confirming that as length of membership increases, the 'certainty equivalent' of the participant decreases. Copyright © 2006 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jid.1278
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 18 (2006)
Issue (Month): 4 ()
Pages: 571-594
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Handle: RePEc:wly:jintdv:v:18:y:2006:i:4:p:571-594

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References listed on IDEAS
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  1. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October. [Downloadable!] (restricted)
  2. Khandker, Shahidur R., 2003. "Microfinance and poverty - evidence using panel data from Bangladesh," Policy Research Working Paper Series 2945, The World Bank. [Downloadable!]
  3. Mark M. Pitt & Shahidur R. Khandker & Omar Haider Chowdhury & Daniel L. Millimet, 2003. "Credit Programs for the Poor And the Health Status of Children in Rural Bangladesh," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 87-118, February. [Downloadable!] (restricted)
  4. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-46, April. [Downloadable!] (restricted)
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  5. Mark M. Pitt & Shahidur R. Khandker, 1998. "The Impact of Group-Based Credit Programs on Poor Households in Bangladesh: Does the Gender of Participants Matter?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 958-996, October. [Downloadable!] (restricted)
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