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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
  • Emran, M. Shahe

Abstract

This paper takes advantage of 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 instrumental variables strategy that exploits a jump and a kink at the 10 decimal (0.1 acre) land ownership threshold driven by MFI screening process to ensure repayment by excluding the ultra-poor. Evidence from the local 2SLS estimator (Dong, 2017) shows that microfinance membership improves food security during the hungry season, especially for the poorest households who struggle to survive at the margin of 1 and 2 meals a day. Microfinance membership also reduces the probability of short-term migration for work during Monga, but is ineffective in reducing the incidence of advance sale of labor at low wages. These conclusions are also supported by estimates from minimum-biased IPW estimator of Millimet and Tchernis (2013) that reduces bias without imposing exclusion restrictions.

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  • Berg, Claudia & Emran, M. Shahe, 2017. "Microfinance and Vulnerability to Seasonal Famine in a Rural Economy: Evidence from Monga in Bangladesh," MPRA Paper 79818, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:79818
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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; Aggregate Anticipated Shock; Seasonal Famine; Monga; Coping Mechanisms; Food Security; Distress Sale of Labor; Short-term Migration; Local 2SLS.;
    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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