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Microfinance and Household Poverty Reduction: New evidence from India

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Author Info

  • Katsushi S. Imai

    (Economics, School of Social Sciences, University of Manchester (UK) and RIEB, Kobe University (Japan)
    Institute of Development and Policy Management, School of Environment and Development, University of Manchester (UK) and Lancashire Business School, University of Central Lancashire (UK))

  • Samuel Kobina Annim

    (Economics, School of Social Science, University of Manchester, UK)

Abstract

The objective of the present study is to examine whether household access to microfinance reduces poverty. Using national household data from India, treatment effects model is employed to estimate the poverty-reducing effects of MFIs loans for productive purposes, such as investment in agriculture or non-farm businesses on household poverty levels. These models take into account the endogenous binary treatment effects and sample selection bias associated with access to MFIs. Despite some limitations, such as those arising from potential unobservable important determinants of access to MFIs, significant positive effect of MFI productive loans on multidimensional welfare indicator has been confirmed. The significance of treatment "effects" coefficients have been verified by both Tobit and Propensity Score Matching models. In addition, we found that loans for productive purposes were more important for poverty reduction in rural than in urban areas. However in urban areas, simple access to MFIs has larger average poverty-reducing effects than the access to loans from MFIs for productive purposes. This leads to exploring service delivery opportunities that provide an additional avenue to monitor the usage of loans to enhance the outreach.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2010-14.pdf
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2010-14.

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Length: 41 pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:kob:dpaper:dp2010-14

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Keywords: Microfinance; Poverty; Evaluation; India; Propensity Score Matching;

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References

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  1. Basu, Priya & Srivastava, Pradeep, 2005. "Scaling-up microfinance for India's rural poor," Policy Research Working Paper Series 3646, The World Bank.
  2. Angus Deaton & Valerie Kozel, 2005. "Data and Dogma: The Great Indian Poverty Debate," World Bank Research Observer, World Bank Group, World Bank Group, vol. 20(2), pages 177-199.
  3. Weiss, John & Montgomery, Heather, 2004. "Great expectations: microfinance and poverty reduction in Asia and Latin America," MPRA Paper 33142, University Library of Munich, Germany.
  4. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  5. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2008. "Microfinance meets the market," Policy Research Working Paper Series 4630, The World Bank.
  6. P. Mosley, 2001. "Microfinance and Poverty in Bolivia," Journal of Development Studies, Taylor & Francis Journals, vol. 37(4), pages 101-132.
  7. Khandker, Shahidur R., 2003. "Microfinance and poverty - evidence using panel data from Bangladesh," Policy Research Working Paper Series 2945, The World Bank.
  8. Katsushi Imai & Thankom Arun, 2008. "Does Microfinance Reduce Poverty in India?," The School of Economics Discussion Paper Series, Economics, The University of Manchester 0814, Economics, The University of Manchester.
  9. Adams, Alayne M. & Evans, Timothy G. & Mohammed, Rafi & Farnsworth, Jennifer, 1997. "Socioeconomic stratification by wealth ranking: Is it valid?," World Development, Elsevier, vol. 25(7), pages 1165-1172, July.
  10. Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, Elsevier, vol. 24(1-2), pages 3-61.
  11. Menno Pradhan & Martin Ravallion, 2000. "Measuring Poverty Using Qualitative Perceptions Of Consumption Adequacy," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 462-471, August.
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Cited by:
  1. David Hulme & Thankom Arun, 2011. "What’s wrong and right with microfinance – missing an angle on responsible finance?," Brooks World Poverty Institute Working Paper Series 15511, BWPI, The University of Manchester.
  2. Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2011. "The Impact of Microfinance and its Role in Easing Poverty of Rural Households: Estimations from Pakistan," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2011-28, Research Institute for Economics & Business Administration, Kobe University.
  3. Dan Brockington & Nicola Banks, 2014. "Exploring the Success of BRAC Tanzania’s Microcredit Programme," Brooks World Poverty Institute Working Paper Series 20214, BWPI, The University of Manchester.
  4. Lawrence Sáez, 2013. "Methods in governance research: a review of research approaches," Brooks World Poverty Institute Working Paper Series esid-017-13, BWPI, The University of Manchester.
  5. Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2012. "Microfinance and its role in household poverty reduction: findings from Pakistan," Brooks World Poverty Institute Working Paper Series 17312, BWPI, The University of Manchester.
  6. Katsushi S. Imai & Raghav Gaiha & Ganesh Thapa & Samuel Kobina Annim, 2013. "Financial Crisis In Asia: Its Genesis, Severity And Impact On Poverty And Hunger," Journal of International Development, John Wiley & Sons, Ltd., vol. 25(8), pages 1105-1116, November.
  7. Katsushi S. Imai & MD. Shafiul Azam, 2011. "Does Microfinance Reduce Poverty in Bangladesh? New Evidence from Household Panel Data," Journal of Development Studies, Taylor & Francis Journals, vol. 48(5), pages 633-653, October.
  8. Verrest, Hebe, 2013. "Rethinking Microentrepreneurship and Business Development Programs: Vulnerability and Ambition in Low-income Urban Caribbean Households," World Development, Elsevier, vol. 47(C), pages 58-70.
  9. Katsushi S. Imai & Ganesh Thapa & Samuel Kobina Annim, 2010. "Microfinance and Poverty -A Macro Perspective," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2010-30, Research Institute for Economics & Business Administration, Kobe University.
  10. Jing You & Samuel Annim, 2013. "The impact of microcredit on child education: quasi-experimental evidence from rural China," Brooks World Poverty Institute Working Paper Series 18313, BWPI, The University of Manchester.
  11. You, Jing, 2013. "The role of microcredit in older children’s nutrition: Quasi-experimental evidence from rural China," Food Policy, Elsevier, Elsevier, vol. 43(C), pages 167-179.
  12. Egziabher, Kidanemariam G. & Mathijs, Erik & Deckers, Jozef A. & Gebrehiwot, Kindeya & Bauer, Hans & Maertens, Miet, 2013. "The Economic Impact of a New Rural Extension Approach in Northern Ethiopia," Working Papers, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics 146558, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
  13. Anurag Priyadarshee & Asad K. Ghalib, 2011. "The Andhra Pradesh microfinance crisis in India: manifestation, causal analysis, and regulatory response," Brooks World Poverty Institute Working Paper Series 15711, BWPI, The University of Manchester.
  14. Angioloni, Simone & Kudabaev, Zarylbek & Ames, Glenn C.W. & Wetzstein, Michael E., 2013. "Microcredit impact in Kyrgyzstan: A Case Study," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida, Southern Agricultural Economics Association 143838, Southern Agricultural Economics Association.
  15. Shahidur R. Khandker & Hussain A. Samad, 2013. "Microfinance Growth and Poverty Reduction in Bangladesh: What Does the Longitudinal Data Say?," Working Papers 16, Institute of Microfinance (InM).
  16. Katsushi S. Imai & Raghav Gaiha & Ganesh Thapa & Samuel Kobina Annim & Aditi Gupta, 2012. "Financial Performance of Microfinance Institutions-A Macroeconomic and Institutional Perspective," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2012-04, Research Institute for Economics & Business Administration, Kobe University.

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