Declining Benefits to Membership in Micro Finance Programs - Theory and Empirical Evidence

Nidhiya Menon

Development and Comp Systems from University Library of Munich, Germany

Abstract: This paper studies the benefits of participation in micro finance programs, and shows that although membership in these programs is an effective instrument in combating inter-seasonal consumption differences, there is a threshold level of length of participation beyond which benefits begin to diminish. Returns from membership are modeled using an Euler equation approach. Fixed effects non-linear least squares estimation of parameters using data from twenty four villages of the Grameen Bank suggests that that maximum effect of participation occurs after three and a half to four years of membership. These estimates suggest that after seven to eight years of participation, membership no longer has a mitigating marginal effect on seasonal shocks to per capita consumption. Such non-linearities may underlie anecdotal evidence indicating that as compared to those who have recently joined, experienced participants are more likely to miss installment payments on outstanding loans.

Keywords: Micro finance; diminishing returns; consumption smoothing (search for similar items in EconPapers)
JEL-codes: D12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004-03-22
New Economics Papers: this item is included in nep-dev, nep-mfd and nep-mic
Note: Type of Document - pdf; pages: 25. 25 pages, pdf document.
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/dev/papers/0403/0403006.pdf (application/pdf)

Related works:
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:wpa:wuwpdc:0403006

Access Statistics for this paper

More papers in Development and Comp Systems from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).