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The Influence Of Microfinance On The Education Decisions Of Rural Households: Evidence From Bolivia

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  • Jorge Higinio Maldonado

Abstract

Increased access to education will be key in any efforts to improve the quality of rural life and the welfare of the next generation in developing countries. Microfinance programshave been among components of strategies for poverty alleviation that have attempted to address this challenge. This essay uses data from three different surveys of households of clients of microfinance Organizations (MFOs) in Bolivia to examine several channels through which microfinance may exert an influence on Education outcomes. Five channels are identified, designated as income, risk-management, child-labor demand, gender, and information effects. Based on an econometric specification that explains schooling decisions at the household level, regression models are used to examine determinants of education achievements and to make inferences about the potential influence of microfinance, through these channels, on those achievements. The results challenge usual assumptions in microfinance programs. In particular, for some ranges of household income and some types of borrowers, access to loans has conflicting effects on school enrollment. On the one hand, loans increase the demand for education as a result of income, risk-management, gender, and information effects. On the other hand, credit-constrained households that cultivate land or operate labor-intensive microenterprises discover new demands for child labor, either for farming, working in the microenterprise, or taking care of siblings while the mothers operate the new or expanded business. Significant program and policy consequences are derived from these paradoxical results.

Suggested Citation

  • Jorge Higinio Maldonado, 2005. "The Influence Of Microfinance On The Education Decisions Of Rural Households: Evidence From Bolivia," Documentos CEDE 3606, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:003606
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    Cited by:

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    2. Shirantha Heenkenda & D.P.S Chandrakumara, 2015. "A Canonical Analysis on the Relationship between Financial Risk Tolerance and Household Education Investment in Sri Lanka," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 1(4), pages 7-23, October.
    3. Leonardo Becchetti & Pierluigi Conzo & Fabio Pisani, 2011. "Virtuous Interactions in Removing Exclusion: The Link between Foreign Market Access and Access to Education," Journal of Development Studies, Taylor & Francis Journals, vol. 47(9), pages 1431-1454, September.
    4. Ricardo Bebczuk & Francisco Haimovich, 2007. "MDGs and Microcredit: An Empirical Evaluation for Latin American Countries," CEDLAS, Working Papers 0048, CEDLAS, Universidad Nacional de La Plata.
    5. Kasat, Puja, 2010. "Innovative Approaches to Developmental Microfinance in India," MPRA Paper 22238, University Library of Munich, Germany.
    6. Werner L. Hernani-Limarino & Paul Villarroel, 2015. "Evaluando el Impacto de Microcréditos en Bolivia - Evidencia del Crédito Productivo Individual – Banco de Desarrollo Productivo," Working Papers 05/2015, Fundación Aru.
    7. Dao, Nguyen Dinh, 2020. "Does the microcredit intervention change the life of the low- and middle-income households in rural Vietnam? Evidence from panel data," World Development Perspectives, Elsevier, vol. 20(C).
    8. Flore Gubert & François Roubaud, 2005. "Analyser l’impact d’un projet de Micro-finance : l’exemple d’ADéFI à Madagascar," Working Papers DT/2005/14, DIAL (Développement, Institutions et Mondialisation).
    9. Ricardo N. Bebczuk, 2008. "Financial Inclusion in Latin America and the Caribbean: Review and Lessons," CEDLAS, Working Papers 0068, CEDLAS, Universidad Nacional de La Plata.
    10. Juan Carlos Echeverry Garzón & Ángela María Fonseca Galvis, 2005. "The Social Impact of the Banking Sector in Colombia, 1995 – 2002," DEGIT Conference Papers c010_039, DEGIT, Dynamics, Economic Growth, and International Trade.

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    Keywords

    Microfinance;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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