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Impact of Microfinance on Rural Households in the Philippines

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Author Info

  • Orbeta, Aniceto Jr. C.
  • Dingcong, Clarence G.
  • Kondo, Toshio
  • Infantado, Christine

Abstract

This paper reports on the impact evaluation study of the Rural Microenterprise Finance Project (RMFP) in the Philippines. RMFP aimed to support efforts of the Government of the Philippines to strengthen rural financial institutions by assisting organizations that employed the Grameen Bank Approach (GBA) in providing credit to the poor. The project was implemented by the People’s Credit and Finance Corporation (PCFC) and funded by the Asian Development Bank. The evaluation uses a quasi-experimental design with incoming clients of randomly selected participating microfinance institutions as the comparison group. An important innovation in the study is the inclusion of the appropriate number of former clients among the treatment group. Qualified nonparticipating households provide the control for area effects. The impact estimation uses the difference-in-difference estimation technique which effectively controls for the known sources of biases namely: nonrandom program participation (sample selection), nonrandom program placement, and nonrandom drop-out. The results led the authors to recommend that for microfinance programs to be effective as a poverty-alleviation tool there is a need to review and constantly monitor the effectiveness of the targeting procedures. In addition, it was pointed out that there may be a need to assist the poor in selecting appropriate projects that not only ensure loan repayment but also generate ample profit as well.

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Bibliographic Info

Paper provided by Philippine Institute for Development Studies in its series Discussion Papers with number DP 2008-05.

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Length: 37
Date of creation: 2008
Date of revision:
Handle: RePEc:phd:dpaper:dp_2008-05

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Keywords: microfinance; Philippines; impact evaluation; quasi-experimental design;

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References

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  1. Ricardo Bebczuk & Francisco Haimovich, 2007. "MDGs and Microcredit: An Empirical Evaluation for Latin American Countries," CEDLAS, Working Papers 0048, CEDLAS, Universidad Nacional de La Plata.
  2. Leslie E. Papke & Jeffrey M. Wooldridge, 1993. "Econometric Methods for Fractional Response Variables with an Application to 401(k) Plan Participation Rates," NBER Technical Working Papers 0147, National Bureau of Economic Research, Inc.
  3. 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.
  4. Weiss, John & Montgomery, Heather, 2004. "Great expectations: microfinance and poverty reduction in Asia and Latin America," MPRA Paper 33142, University Library of Munich, Germany.
  5. Sajeda Amin & Ashok S. Rai & Giorgio Topa, 1999. "Does Microcredit Reach the Poor and Vulnerable? Evidence from Northern Bangladesh," CID Working Papers 28, Center for International Development at Harvard University.
  6. Maldonado, Jorge Higinio & Gonzalez-Vega, Claudio & Romero, Vivianne, 2003. "The Influence Of Microfinance On The Education Decisions Of Rural Households: Evidence From Bolivia," 2003 Annual meeting, July 27-30, Montreal, Canada 22067, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Zeller, Manfred & Sharma, Manohar & Ahmed, Akhter U. & Rashid, Shahidur, 2001. "Group-based financial institutions for the rural poor in Bangladesh: an institutional- and household-level analysis," Research reports 120, International Food Policy Research Institute (IFPRI).
  8. Coleman, Brett E., 2006. "Microfinance in Northeast Thailand: Who benefits and how much?," World Development, Elsevier, vol. 34(9), pages 1612-1638, September.
  9. Weiss, John & Montgomery, Heather & Kurmanalieva, Elvira, 2003. "Micro finance and poverty reduction in Asia: what is the evidence?," MPRA Paper 33140, University Library of Munich, Germany.
  10. Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017.
  11. Coleman, Brett E., 1999. "The impact of group lending in Northeast Thailand," Journal of Development Economics, Elsevier, vol. 60(1), pages 105-141, October.
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Cited by:
  1. Bensch, Gunther & Peters, Jörg & Schmidt, Christoph M., 2012. "Impact evaluation of productive use—An implementation guideline for electrification projects," Energy Policy, Elsevier, vol. 40(C), pages 186-195.
  2. Bensch, Gunther & Kluve, Jochen & Peters, Jörg, 2011. "Impacts of Rural Electrification in Rwanda," IZA Discussion Papers 6195, Institute for the Study of Labor (IZA).

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