Empowering women through microcredit in Djibouti

In this study, we construct original measures of women's empowerment in economic, social, and interpersonal dimensions to estimate the effect of microcredit on women's empowerment in Djibouti. Using survey data covering 2060 Djiboutian households, we examine the extent to which access to microcredit, the amount of loans obtained, and their duration modify women's status at home. We employ an instrumental variables strategy and develop three instruments: (i) household's membership of a saving and credit cooperative, (ii) the availability of formal banks at the village or community level, and (iii) the availability of formal cooperatives at the village or community level. We find that microcredit has positive and significant effects on women's autonomy, but these effects become significantly negative as the number of loans taken out increases and as the length of time spent in the program rises. Women from households with access to micro‐loans are respectively 45.0%, 41.4%, and 15.7% more likely to be economically, socially, and interpersonally empowered. The results of the study are robust across specifications and econometric techniques employed and confirm the generally mixed socioeconomic effects of microcredit programs.