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Long-term benefits of membership in microfinance programmes

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  • Nidhiya Menon

    (Department of Economics & International Business School, Brandeis University, Waltham, MA, USA)

Abstract

This study studies the benefits of membership in microfinance programmes, and examines whether membership in these programmes is an effective instrument in smoothing inter-seasonal consumption. We hypothesise that the benefits to participation accrue differentially over time, as more experienced participants are better equipped on their own to minimise per capita consumption fluctuations. Using an Euler equation approach, we show that consumption differentials across seasons are inversely related to length of membership. Estimates from the gender-stratified model suggest that for a female participant, 1 year of membership reduces the percentage change in per capita consumption, caused by a unit shock, by 6 per cent. We present simulation results confirming that as length of membership increases, the 'certainty equivalent' of the participant decreases. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Nidhiya Menon, 2006. "Long-term benefits of membership in microfinance programmes," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(4), pages 571-594.
    • Handle: RePEc:wly:jintdv:v:18:y:2006:i:4:p:571-594
    DOI: 10.1002/jid.1278
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    References listed on IDEAS

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    Cited by:

    1. Nidhiya Menon & Yana van der Meulen Rodgers, 2011. "How Access to Credit Affects Self-employment: Differences by Gender during India's Rural Banking Reform," Journal of Development Studies, Taylor & Francis Journals, vol. 47(1), pages 48-69.
    2. Berhane, Guush & Gardebroek, Cornelius, 2012. "Assessing the long-term impact of microcredit on rural poverty: Does the timing and length of participation matter?," ESSP working papers 43, International Food Policy Research Institute (IFPRI).
    3. Rahul Nilakantan & Deepak Iyengar & Samar K. Datta & Shashank Rao, 2021. "On Ethical Violations in Microfinance Backed Small Businesses: Family and Household Welfare," Journal of Business Ethics, Springer, vol. 172(4), pages 785-802, September.
    4. Han, Linghui & Hare, Denise, 2013. "The link between credit markets and self-employment choice among households in rural China," Journal of Asian Economics, Elsevier, vol. 26(C), pages 52-64.
    5. Jennings, Larissa & Shore, Deborah & Strohminger, Nancy & Allison, Burgundi, 2015. "Entrepreneurial development for U.S. minority homeless and unstably housed youth: A qualitative inquiry on value, barriers, and impact on health," Children and Youth Services Review, Elsevier, vol. 49(C), pages 39-47.
    6. Scott Fulford, 2010. "The effects of financial development in the short and long run," Boston College Working Papers in Economics 741, Boston College Department of Economics, revised 31 May 2011.
    7. Md. Abul Basher, 2010. "Promotional role of microcredit: Evidence from the Grameen Bank of Bangladesh," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(4), pages 521-529.
    8. Hisaki KONO & Kazushi TAKAHASHI, 2010. "Microfinance Revolution: Its Effects, Innovations, And Challenges," The Developing Economies, Institute of Developing Economies, vol. 48(1), pages 15-73, March.
    9. Abu Zafar Shahriar, 2012. "Impact of Microfinance on Seasonal Hardship in Northern Bangladesh: A Propensity Score Matching Approach," Journal of South Asian Development, , vol. 7(1), pages 43-64, April.
    10. Fulford, Scott L., 2013. "The effects of financial development in the short and long run: Theory and evidence from India," Journal of Development Economics, Elsevier, vol. 104(C), pages 56-72.

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