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Financial Inclusion And The Resilience Of Poor Households

Author

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  • Vighneswara Swamy

    (IBS-Hyderabad, ICFAI Foundation for Higher Education, India)

Abstract

Financial inclusion through microfinance is found to promote resilience strategies of the poor as it has become more demand sensitive. Extant literature suggests that there have been perceptible changes in the living conditions of the rural poor mainly on the economic side and relatively on the social side owing to the role of self-help groups (SHGs). Further, it is widely believed that SHGs have had a positive impact on the poverty levels and standards of living of the poor and more particularly on the economic empowerment of women. Given this context, this study reviews the financial diaries of the poor and provides evidence of the impact of financial inclusion program on the poor beneficiary households in India. More specifically, this study answers the specific question: what is the impact of SHGs on the annual income of the participating poor households. Based on stratified random sampling this study uses the nearest-neighbor matching method to construct the control groups to estimate the program impact. Keeping in view the stabilization of the financial inclusion program, this study covers the financial inclusion beneficiaries in the Shimoga district of Karnataka state in India for the period 2010 – 2015. Using the Paired-Sample t-test and the difference-in-difference approach, the study notices a significant positive change in the income levels of the beneficiaries resulting in the resilience of the poor households. This study notices perceptible changes in the living conditions of the rural poor mainly on the economic side and relatively on the social side owing to the role of SHGs. Financial inclusion has a positive impact on the poverty levels and standards of living of the poor and more particularly on the economic empowerment of women. This approach has enhanced the resilience of the poor households as there has been an increase in the mean annual income to the extent of 72% from the pre-SHG situation to the after-SHG impact. The results suggest that the financial inclusion is more beneficial in strengthening the resilience of the poor households particularly that of the downtrodden classes in India. Further, these findings provide direction for policymakers and practitioners involved in building and measuring changes in household resilience. This study implies that effective implementation of financial inclusion program has greater benefits and a win-win situation for all the stakeholders.

Suggested Citation

  • Vighneswara Swamy, 2019. "Financial Inclusion And The Resilience Of Poor Households," Journal of Developing Areas, Tennessee State University, College of Business, vol. 53(4), pages 179-192, Fall.
    • Handle: RePEc:jda:journl:vol.53:year:2019:issue4:pp179-192
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    Citations

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    Cited by:

    1. Rajesh Barik & Sanjaya Kumar Lenka & Jajati K. Parida, 2022. "Financial Inclusion and Human Development in Indian States: Evidence from the Post-Liberalisation Periods," Indian Journal of Human Development, , vol. 16(3), pages 513-527, December.
    2. Ryszard Kata & Małgorzata Wosiek, 2024. "Income Variability of Agricultural Households in Poland: A Descriptive Study," Agriculture, MDPI, vol. 14(3), pages 1-17, February.
    3. Erika Quendler & Mangirdas Morkūnas, 2020. "The Economic Resilience of the Austrian Agriculture since the EU Accession," JRFM, MDPI, vol. 13(10), pages 1-20, October.
    4. Shrabanti Maity, 2023. "Financial inclusion also leads to social inclusion—myth or reality? Evidences from self-help groups led microfinance of Assam," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-22, December.

    More about this item

    Keywords

    Economic Development; Institutions and Growth; Financial Inclusion; Banking; Poverty; Cross-Sectional Analysis; Consumption; Saving;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • N35 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Asia including Middle East

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