Effect of Microfinance on Vulnerability, Poverty and Risk in Low Income Households
AbstractUncertainty and unpredictability faced by low-income households increase their vulnerability making poverty even more unbearable. India¡¦s National Bank for Agriculture and Rural Development (NABARD)-initiated Self-Help Group (SHG) program, which is currently the largest and fastest growing microfinance program in the developing world, has been aggressively promoted as a way of combating poverty. This paper investigates whether or not SHG participation results in reducing poverty and vulnerability. A theoretical framework is developed to examine the mechanisms through which the pecuniary and non-pecuniary effects of the SHG program on the beneficiaries¡¦ earnings and empowerment, influence their households¡¦ ability to manage risk. Going beyond the traditional poverty estimates, we use a vulnerability measure which quantifies the welfare loss associated with poverty as well as different types of risks like aggregate and idiosyncratic risks. Applying this measure to an Indian panel survey data for 2000 and 200ƒ£, we find that SHG members have lower vulnerability as compared to a group of non-SHG (control) members. Furthermore, we find that the poverty contributes to about 80 percent of the vulnerability faced by the household followed by aggregate risk.
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2007:31.
Length: 35 pages
Date of creation: 21 Dec 2007
Date of revision:
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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
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Microfinance; Vulnerability; Poverty; Risk Coping;
Other versions of this item:
- Ranjula Bali Swain & Maria Floro, 2008. "Effect of Microfinance on Vulnerability, Poverty and Risk in Low Income Households," Working Papers 2008-02, American University, Department of Economics.
- D14 - Microeconomics - - Household Behavior - - - Personal Finance
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
- NEP-CWA-2008-01-05 (Central & Western Asia)
- NEP-DEV-2008-01-05 (Development)
- NEP-MFD-2008-01-05 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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35193, University Library of Munich, Germany, revised 07 Aug 2011.
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