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Does Micro Finance Institution Improve Welfare? A Double Difference Analysis of Indonesian Community-level Data

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  • Heriyaldi

    ()
    (Department of Economics, Padjadjaran University)

  • Arief Anshory Yusuf

    ()
    (Department of Economics, Padjadjaran University)

Abstract

Using a longitudinal community-level data of Indonesia, we test whether a presence of 5 different microfinance institutions (MFI) within a community has contributed to the improvement in the welfare (as measured by per capita expenditure) of the community's population. Applying the Difference-in-Difference analysis to this data, we find that direct access to MFI through its presence in the community has an impact only in rural areas. We find no evidences that direct access to MFI in urban area improves household welfare. Moreover, among the 5 different MFI in rural areas,we find evidence of an impact only for two micro finance institutions namely Bank Rakyat Indonesia (BRI) and Bank Perkreditan Rakyat (BPR). This finding suggests that BRI, as the largest and most successful state-owned micro finance institution in Indonesia, should maintain its orientation in rural banking services.

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File URL: http://lp3e.fe.unpad.ac.id/wopeds/201307.pdf
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Bibliographic Info

Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 201307.

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Length: 13 pages
Date of creation: Mar 2013
Date of revision: Mar 2013
Handle: RePEc:unp:wpaper:201307

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Keywords: Micro Finance Institutions; Difference-in-Difference; IFLS; Indonesia;

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References

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  1. Jay K. ROSENGARD & A. PRASETYANTOKO, 2011. "If the Banks are Doing So Well, Why Can't I Get a Loan? Regulatory Constraints to Financial Inclusion in Indonesia," Asian Economic Policy Review, Japan Center for Economic Research, Japan Center for Economic Research, vol. 6(2), pages 273-296, December.
  2. DeLoach, Stephen B. & Lamanna, Erika, 2011. "Measuring the Impact of Microfinance on Child Health Outcomes in Indonesia," World Development, Elsevier, Elsevier, vol. 39(10), pages 1808-1819.
  3. Gertler, Paul & Levine, David I. & Moretti, Enrico, 2003. "Do Microfinance Programs Help Families Insure Consumption Against Illness?," Center for International and Development Economics Research, Working Paper Series, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkele qt5811j217, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  4. Seibel, Hans Dieter, 2000. "How an Agricultural Development Bank Revolutionized Rural Finance: The Case of Bank Rakyat Indonesia," Working Papers 2000,1, University of Cologne, Development Research Center.
  5. Patten, Richard H. & Rosengard, Jay k. & Johnston, Don JR., 2001. "Microfinance Success Amidst Macroeconomic Failure: The Experience of Bank Rakyat Indonesia During the East Asian Crisis," World Development, Elsevier, Elsevier, vol. 29(6), pages 1057-1069, June.
  6. Mosley, Paul & Hulme, David, 1998. "Microenterprise finance: Is there a conflict between growth and poverty alleviation?," World Development, Elsevier, Elsevier, vol. 26(5), pages 783-790, May.
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