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Risk Management among the Poor: The Case of Microfinancial Services

Author

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  • Arun, Thankom Gopinath

    (University of Essex)

  • Bendig, Mirko

    (German Institute for Global and Area Studies)

Abstract

This paper argues that the level of financial services provision determines the risk management strategies among the poor. The paper estimates the determinants of the household’s use of one, two or all three types of microfinancial services applying ordered probit models and additionally probit models for combinations of them. By doing this on household survey data from Sri Lanka, there is empirical evidence that household's probability to participate in microfinancial services increases with rising self perception towards risk. Further, we find that it depends highly on the type of risk, if a household is more or less likely to use microfinancial services in Sri Lanka, whereas the accessibility to one, two or three microfinancial services is determined by the experience of specific hazards in the past. The study finds that the poor are less likely to use microfinancial services than their better off counterparts.

Suggested Citation

  • Arun, Thankom Gopinath & Bendig, Mirko, 2010. "Risk Management among the Poor: The Case of Microfinancial Services," IZA Discussion Papers 5174, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp5174
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    References listed on IDEAS

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    Cited by:

    1. Bendig, Mirko & Arun, Thankom Gopinath, 2011. "Enrolment in Micro Life and Health Insurance: Evidences from Sri Lanka," IZA Discussion Papers 5427, IZA Network @ LISER.
    2. Augustine Kwadwo Yeboah, 2018. "Determinants of Micro-Insurance Ownership Decision: Empirical Evidence from Informal Commercial Market Business Operators in Ghana," Journal of Social and Development Sciences, AMH International, vol. 8(4), pages 14-23.
    3. David Hulme & Thankom Arun, 2011. "What’s wrong and right with microfinance – missing an angle on responsible finance?," Global Development Institute Working Paper Series 15511, GDI, The University of Manchester.

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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand

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