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Reducing Vulnerability through Microfinance: Assessing the Impact of Self-Help Groups in India

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  • Ranjula Bali Swain
  • Maria S. Floro

Abstract

We investigate if participation in Indian Self Help Group microfinance program (SHG) results in reducing vulnerability. Using theSHG rural household survey data collected in 2003, we examine the poverty and vulnerability profiles of SHG and non-SHG rural, low-income household members. Our construction of the vulnerability is based on a methodology that allows for the estimation of household vulnerability using cross-sectional survey data. We use propensity score matching to eliminate the potential selection bias that may arise due to unobservable attributes. We empirically examine the current poverty and vulnerability status of households in SHG and non-SHG groups. We match the treated and comparison groups on the basis of their propensity scores to correct for selection bias and then estimate the average treatment on treated effect using nearest neighbour matching and local linear regression algorithm. To check the robustness of the results, we perform sensitivity analysis and estimate Rosenbaum's bounds. Our empirical results show that despite a disproportionately high percentage of poor in the SHG members, vulnerability is not significantly different between the SHG and non-SHG members.

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Bibliographic Info

Paper provided by American University, Department of Economics in its series Working Papers with number 2010-19.

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Date of creation: 2010
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Handle: RePEc:amu:wpaper:2010-19

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Web page: http://www.american.edu/cas/economics/

Related research

Keywords: Microfinance; Vulnerability; Poverty; Self Help Groups;

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References

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  1. Zimmerman, Frederick J. & Carter, Michael R., 2003. "Asset smoothing, consumption smoothing and the reproduction of inequality under risk and subsistence constraints," Journal of Development Economics, Elsevier, vol. 71(2), pages 233-260, August.
  2. World Bank, 2000. "India : Reducing Poverty, Accelerating Development," World Bank Publications, The World Bank, number 15185, January.
  3. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
  4. G√ľnther, Isabel & Harttgen, Kenneth, 2009. "Estimating Households Vulnerability to Idiosyncratic and Covariate Shocks: A Novel Method Applied in Madagascar," World Development, Elsevier, vol. 37(7), pages 1222-1234, July.
  5. Frank Ellis, 1998. "Household strategies and rural livelihood diversification," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 1-38.
  6. Ichino, Andrea & Mealli, Fabrizia & Nannicini, Tommaso, 2006. "From Temporary Help Jobs to Permanent Employment: What Can We Learn from Matching Estimators and their Sensitivity?," CEPR Discussion Papers 5736, C.E.P.R. Discussion Papers.
  7. Michael Carter & Christopher Barrett, 2006. "The economics of poverty traps and persistent poverty: An asset-based approach," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 178-199.
  8. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
  9. Ligon, Ethan & Schechter, Laura, 2002. "Measuring Vulnerability: The Director's Cut," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  10. Ligon, Ethan & Schechter, Laura, 2002. "Measuring Vulnerability," 2002 Annual meeting, July 28-31, Long Beach, CA 19899, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Bardhan, Pranab & Udry, Christopher, 1999. "Development Microeconomics," OUP Catalogue, Oxford University Press, number 9780198773719.
  12. Stefan Dercon & Pramila Krishnan, 2000. "Vulnerability, seasonality and poverty in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 25-53.
  13. Bali Swain, Ranjula & Varghese, Adel, 2008. "Does Self Help Group Participation Lead to Asset Creation?," Working Paper Series 2008:5, Uppsala University, Department of Economics.
  14. Calvo, Cesar, 2008. "Vulnerability to Multidimensional Poverty: Peru, 1998-2002," World Development, Elsevier, vol. 36(6), pages 1011-1020, June.
  15. Glewwe, Paul & Hall, Gillette, 1998. "Are some groups more vulnerable to macroeconomic shocks than others? Hypothesis tests based on panel data from Peru," Journal of Development Economics, Elsevier, vol. 56(1), pages 181-206, June.
  16. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  17. Felbruegge, Torsten & von Braun, Joachim, 2002. "Is The World Becoming A More Risky Place? Trends In Disasters And Vulnerability To Them," Discussion Papers 18730, University of Bonn, Center for Development Research (ZEF).
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