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

Author

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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:2
    DOI: 10.1515/bejeap-2020-2001
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    Cited by:

    1. Ravi Bhavnani & Nina Schlager & Karsten Donnay & Mirko Reul & Laura Schenker & Maxime Stauffer & Tirtha Patel, 2023. "Household behavior and vulnerability to acute malnutrition in Kenya," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 10(1), pages 1-14, December.
    2. Emran, M. Shahe & Shilpi, Forhad, 2021. "Microfinance, Moneylenders, and Economic Shocks: An Assessment of the Bangladesh Experience," MPRA Paper 111159, University Library of Munich, Germany.
    3. Raaj Kishore Biswas & Enamul Kabir & Hafiz T. A. Khan, 2019. "Causes of Urban Migration in Bangladesh: Evidence from the Urban Health Survey," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 38(4), pages 593-614, August.
    4. Roychowdhury, Punarjit, 2021. "Too unwell to trust? The effect of mental health on social trust in Europe," Economics & Human Biology, Elsevier, vol. 42(C).
    5. Mar√≠a Camila S√°enz Pinz√≥n, 2024. "Instrumentos financieros y bienestar de los hogares rurales colombianos ante choques clim√°ticos," Documentos CEDE 21191, Universidad de los Andes, Facultad de Economía, CEDE.
    6. 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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    Keywords

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    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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