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The Welfare Impacts of Microfinance on Rural Households : Evidence from Boyolali of Indonesia

Author

Listed:
  • Agus Eko Nugroho

    (Centre for Economic Research, The Indonesian Institute of Sciences (LIPI))

Abstract

This paper examines the welfare impact of microfinance on rural hoiiseholds in four villages of Boyolali, Indonesia. It is found that access to microfinance services of formal microfinance institutions (MFIs), such as micro banks, contribute to higher levels of child education, greater confidence in dealing with others, and reducing the probability of facing household financial problems. This is the case as the disbursement of loans helps to finance education-related expenditures of children. The utilization of loans for productive purposes has the potential to increase income, leading to greater self-confidence in dealing with others. Similarly, greater incomes resulting from loans can also enhance the capability to cope with risk and vulnerability and hence, reduce the likelihood of facing financial distress. However, borrowing from moneylenders has little welfare impacts on rural households. Access to loans from moneylenders cannot reduce the probability of having financial difftculties, and failing to enhance selfconfidence in dealing with others.

Suggested Citation

  • Agus Eko Nugroho, 2011. "The Welfare Impacts of Microfinance on Rural Households : Evidence from Boyolali of Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 59, pages 257-278, December.
    • Handle: RePEc:lpe:efijnl:201113
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    More about this item

    Keywords

    microfinance; weifare impact; poverty;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • 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

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