Effect of Microfinance on Vulnerability, Poverty and Risk in Low Income Households

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Effect of Microfinance on Vulnerability, Poverty and Risk in Low Income Households

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dc.contributor.author Swain, Ranjula Bali
dc.contributor.author Floro, Maria S.
dc.date.accessioned 2009-02-20T21:23:46Z
dc.date.available 2009-02-20T21:23:46Z
dc.date.created 2008
dc.date.issued 2008
dc.identifier.uri http://hdl.handle.net/1961/5006
dc.description Working paper No. 2008-02. 36 pages. en
dc.description.abstract Uncertainty and unpredictability faced by low-income households increase their vulnerability making poverty even more unbearable. India’s National Bank for Agriculture and Rural Development (NABARD)-initiated Self-Help Group (SHG) program, which is currently the largest and fastest growing microfinance program in the developing world, has been aggressively promoted as a way of combating poverty. This paper investigates whether or not SHG participation results in reducing poverty and vulnerability. A theoretical framework is developed to examine the mechanisms through which the pecuniary and non-pecuniary effects of the SHG program on the beneficiaries’ earnings and empowerment, influence their households’ ability to manage risk. Going beyond the traditional poverty estimates, we use a vulnerability measure which quantifies the welfare loss associated with poverty as well as different types of risks like aggregate and idiosyncratic risks. Applying this measure to an Indian panel survey data for 2000 and 2003, we find that SHG members have lower vulnerability as compared to a group of non-SHG (control) members. Furthermore, we find that the poverty contributes to about 80 percent of the vulnerability faced by the household followed by aggregate risk. en
dc.description.sponsorship Department of Economics, American University en
dc.language.iso en_US en
dc.publisher Department of Economics, American University en
dc.rights Copyright © 2008 by Ranjula Bali Swain and Maria Floro. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. en
dc.subject.other microfinance en
dc.subject.other vulnerability en
dc.subject.other Poverty en
dc.subject.other Risk Coping en
dc.title Effect of Microfinance on Vulnerability, Poverty and Risk in Low Income Households en
dc.type Working Paper en

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