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Does Microfinance Work as a Recovery Tool After Disasters? Evidence from the 2004 Tsunami

Leonardo Becchetti () and Stefano Castriota

World Development, 2011, vol. 39, issue 6, 898-912

Abstract: Summary We evaluate the effectiveness of microfinance as a recovery tool after tsunami by testing the impact of an equity injection from foreign donors which recapitalizes a Sri Lankan MFI and allows it to refinance borrowers seriously damaged by the calamity. We find that loans obtained from the MFI after the catastrophic event have a positive and significant effect on the change in real income and in weekly worked hours, and that the impact on performance variables is significantly stronger for damaged than non-damaged borrowers. Results hold after controlling for selection effects and for heterogeneity in both the timing of the intervention and the characteristics of treatment and control samples.

Keywords: Asia; Sri; Lanka; tsunami; natural; catastrophe; crisis; recovery; microfinance (search for similar items in EconPapers)
Date: 2011
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