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Risk Management among the Poor: The Case of Microfinancial Services


  • Arun, Thankom Gopinath

    () (University of Essex)

  • Bendig, Mirko

    () (German Institute for Global and Area Studies)


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, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5174

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    References listed on IDEAS

    1. Fafchamps, Marcel & Udry, Christopher & Czukas, Katherine, 1998. "Drought and saving in West Africa: are livestock a buffer stock?," Journal of Development Economics, Elsevier, vol. 55(2), pages 273-305, April.
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    6. Mikkel Barslund & Finn Tarp, 2008. "Formal and Informal Rural Credit in Four Provinces of Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 44(4), pages 485-503, April.
    7. Mirko Bendig & Lena Giesbert & Susan Steiner, 2009. "Savings, Credit, and Insurance: Household Demand for Formal Financial Services in Rural Ghana," Brooks World Poverty Institute Working Paper Series 7609, BWPI, The University of Manchester.
    8. Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, vol. 53(2), pages 339-371, August.
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    11. Gulnur MURADOGLU & Fatma TASKIN, 1996. "Differences In Household Savings Behavior: Evidence From Industrial And Developing Countries," The Developing Economies, Institute of Developing Economies, vol. 34(2), pages 138-153, June.
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    Cited by:

    1. David Hulme & Thankom Arun, 2011. "What’s wrong and right with microfinance – missing an angle on responsible finance?," Brooks World Poverty Institute Working Paper Series 15511, BWPI, The University of Manchester.

    More about this item


    financial markets; financial services; microinsurance; Sri Lanka; South Asia;

    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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