Does microfinance reduce rural poverty? Evidence based on household panel data from northern Ethiopia

Guush Berhane and Cornelis Gardebroek

No 51472, 2009 Conference, August 16-22, 2009, Beijing, China from International Association of Agricultural Economists

Abstract: This paper evaluates the long-term impact of microfinance credit from the intensity of participation in borrowing. We use a four-round panel data set on 351 farm households that had access to microfinance in northern Ethiopia. Over the years 1997-2006, with three-year intervals, households are observed on key poverty indicators: improvements in annual consumption and housing improvements. The relatively long duration in the panel enables to measure household poverty changes between consecutive periods and see the long-run effects of exposure to microfinance from the intensity of participation borrowing. The fixed-effects model is innovatively modeled to account for potential selection biases due to both time-invariant and time-varying unobserved individual household heterogeneities. Results show that microfinance borrowing indeed causally increased consumption and housing improvements. A more flexible specification that allows for the number of times the household has been in borrowing also shows that repeated borrowing is effectively increasing consumption: the longer the borrowing relationship the larger the effect partly due to lasting credit effects. Impact estimates that do not account for such dynamic effects may therefore undermine the effect of MFI borrowing.

Keywords: Agricultural Finance; Community/Rural/Urban Development; Food Security and Poverty; International Development (search for similar items in EconPapers)
Pages: 26
Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://ageconsearch.umn.edu/record/51472/files/Re ... ing%20Conference.pdf (application/pdf)

Related works:
Journal Article: Does Microfinance Reduce Rural Poverty? Evidence Based on Household Panel Data from Northern Ethiopia (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae09:51472

DOI: 10.22004/ag.econ.51472

Access Statistics for this paper

More papers in 2009 Conference, August 16-22, 2009, Beijing, China from International Association of Agricultural Economists Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().