Macro-Scaled Microcredit and Constraints on Household Business Development: Evidence from Northern Thailand

Archawa Paweenawat and Narapong Srivisal

No 163, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: This paper studies impacts of One-Million-Baht Village Fund program on entrepreneurial activities of households in northern Thailand. In addition to being one of the largest-scaled microfinance programs to date, the implementation of the Village Fund program provides us with an exogenous variation in the availability of microcredit per household that can be used to form an instrumental variable. We apply our unique dataset, containing the instrument and a precise measure of the extent to which household businesses are financially constrained, to estimate Probit models that are subject to the problem of endogenous borrowing decisions. We find evidence for the positive impacts of the Village Fund program on relieving financial constraints faced by household businesses, but the impacts on business startup rates are not significant. Our findings offer policy implications on improving effectiveness of microfinance programs in promoting household businesses.

Keywords: Entrepreneurship; Financial Constraints; Microfinance; Village Funds (search for similar items in EconPapers)
JEL-codes: G21 G51 O16 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2021-09
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-ent, nep-fdg, nep-mfd and nep-sea
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