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Microfinance and Vulnerability to Seasonal Famine in a Rural Economy: Evidence from Monga in Bangladesh

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  • Berg Claudia

    (IMF, Washington, DC, USA)

  • Emran M. Shahe

    (IPD, Columbia University, New York, NY, USA)

Abstract

This paper uses a unique data set on 143,000 poor households from Northern Bangladesh to analyze the effects of microfinance membership on a household's ability to cope with seasonal famine known as Monga. We develop an identification and estimation strategy that exploits a jump and a kink at the 10 decimal land ownership-threshold driven by the Microfinance Institution (MFI) screening process to ensure repayment by excluding the ultra-poor. Evidence shows that microfinance membership improves food security during Monga, especially for the poorest households who survive at the margin of one and two meals a day. The positive effects on food security are, however, not driven by higher income, as microcredit does not improve the ability to migrate for work, nor does it reduce dependence on distress sale of labor. The evidence is consistent with consumption smoothing being the primary mechanism behind the gains in food security of MFI households during the season of starvation.

Suggested Citation

  • Berg Claudia & Emran M. Shahe, 2020. "Microfinance and Vulnerability to Seasonal Famine in a Rural Economy: Evidence from Monga in Bangladesh," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(3), pages 1-36, July.
  • Handle: RePEc:bpj:bejeap:v:20:y:2020:i:3:p:36:n:10
    DOI: 10.1515/bejeap-2020-2001
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    2. Roychowdhury, Punarjit, 2021. "(Em)Powered by Science? Estimating the Relative Labor Market Returns to Majoring in Science in High School in India," Economics of Education Review, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    microfinance; ultra-poor; seasonal famine; monga; coping mechanisms; food security; distress sale of labor; short-term migration; local 2SLS; O1; I3;
    All these keywords.

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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