Use of microcredit for household income and consumption smoothing by low income communities

Vathsala Wickramasinghe () and Dilshan Fernando
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Vathsala Wickramasinghe: University of Moratuwa
Dilshan Fernando: University of Moratuwa

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Abstract: This paper discusses findings of a study that investigated income, savings and consumption patterns of low income people, and critical factors that influence the use of microcredit- a form of small instant loans targeted for low income people- for household income and consumption smoothing. The sample of the study consisted of households from low income communities living in a lower-middle income country- Sri Lanka. It was found that microcredit borrowers were using the loans for purposes that can be identified as income and consumption smoothing, which is beyond the ideas and intended practice of microcredit. The findings suggests that the consequences of using microcredit for income and consumption smoothing could be costly for households and the society at large.

Keywords: vulnerable communities; loans; income smoothing; debt; credit; borrowing; borrowing consumption smoothing credit debt income smoothing small instant loans loans microcredit; financial behavior; rural development; income diversification; livelihood strategies; economic resilience; informal credit; consumption smoothing; microcredit; household income; small instant loans; household consumption; income stability; microfinance; poverty alleviation; financial inclusion; low-income households (search for similar items in EconPapers)
Date: 2017
Note: View the original document on HAL open archive server: https://hal.science/hal-05588233v1
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Published in International Journal of Consumer Studies, 2017, 41, pp.647 - 658. ⟨10.1111/ijcs.12378⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05588233

DOI: 10.1111/ijcs.12378

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