Does Microcredit Increase Household Welfare in the Absence of Microinsurance?

Akotey, Joseph Oscar; Adjasi, Charles K.D.

doi:10.1016/j.worlddev.2015.09.005

Cited by 61 publications

(46 citation statements)

References 43 publications

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“…For example, studies have examined the impact of microcredit on welfare (Khandker, 1998;Morduch, 1998;Akotey & Adjasi, 2016) and the impact of access to welfare via its effects on consumption smoothing (Bae, Han, & Sohn, 2012;Gloede & Rungruxsirivorn, 2013;Hacamo, 2014). In micro-analysis studies, overindebtedness is indicated by debt repayments that are greater than the income poverty line, which clearly reveals the link between debt and poverty (Russell et al, 2011;D'Alessio & Iezzi, 2013;Ntsalaze & Ikhide, 2016a).…”

Section: Introductionmentioning

confidence: 99%

The threshold effects of household indebtedness on multidimensional poverty

Ntsalaze

Ikhide

2017

IJSE

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DeclarationBy submitting this dissertation electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification.This dissertation includes two published and one accepted but not yet published original papers in peer-reviewed international journals. The fourth paper representing chapter eight is ready for submission for peer review. The development and writing of the papers (published and unpublished) were the principal responsibility of myself and, for each of the cases where this is not the case, a declaration is included in the dissertation indicating the nature and extent of the contributions of co-authors. AbstractGlobal household indebtedness has reached unprecedented levels over the past few decades.The household sector has had to cope with significant losses in income and wealth as well as the burden of debt service since the beginning of the financial crisis. Research focus on this phenomenon, together with its social implications, has grown. This study uses the National Income Dynamics Study (NIDS) data to empirically investigate the effects of household debt on multidimensional poverty. This was achieved through four independent research papers meant to address different angles of the subject. Chapter 5 provides a snapshot of the prevalence of over-indebtedness, using various international indicators and the National Credit Regulator (NCR) indicator, and describes which households are over-indebted. A total of eight percent of South African households are overindebted, and 61.4 percent of those households are found in the lowest income category (R0 -R2 000), spending more than 45 percent of their household income on debt repayments, which is beyond levels that are considered sustainable. The alarming revelation is that, according to the unsecured debt indicator, 15.2 percent of households are over-indebted, while 11 percent of households are driven below the relative income poverty line after making debt repayments. Stellenbosch University https://scholar.sun.ac.za 3The racial distribution indicates that households headed by Africans are overrepresented (79%).Most over-indebted households are found amongst those who own their places of residence (78.6%), do not receive government grants (71.7%), are male (53.8%), and have an unemployed household head (53.5%).Chapter 6 examines the presence of thresholds in the debt-poverty nexus at micro level, i.e. the tipping point above which debt is associated with more multidimensional poverty. By applying the Generalised Additive Model (GAM) using regression splines, the study finds the existence of critical tipping points between household debt service-to-income ratio and multidimensional poverty along with other explanatory variables (age...

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Section: Introductionmentioning

confidence: 99%

The threshold effects of household indebtedness on multidimensional poverty

Ntsalaze

Ikhide

2017

IJSE

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“…While the poverty‐reducing effects are confirmed by many studies at the micro level (e.g. Hossain & Zahra, ; Matin, Sulaiman & Rabbani, ; Karlan & Zinman, ; Imai, Arun & Annim, ; Imai & Azam, ; Asad, Issam & Imai, ; Rahman, Luo & Minjuan, ; Kulb, Hennink, Kiiti & Mutinda, ; Akotey & Adjasi, ), other studies document that using microcredit as a poverty reduction strategy thas trapped needy households into a vicious cycle of poverty and has even weakened rather than empowered women (e.g. Goetz & Gupta, ; Neff, ; Mosley, ; George, ; Maldonado & Gonzάlez‐Vega, ; Bateman, ; Schicks, ; Ganle, Afriyie & Segbefia, ; Seng, ).…”

Section: Introductionmentioning

confidence: 88%

“…The decision to use MFI microcredit and its implications in terms of food consumption can be modelled within a two‐stage framework following Seng (), with the first stage corresponding to the microcredit‐uptake decision and the second stage corresponding to its implications. A selection model for household i that takes up MFI microcredit is built on the empirical models proposed by Imai and Azam (), Akotey and Adjasi () and Seng () and examined using a probit model. Thus, the model is specified in the following latent variable model:

M_{i}^{*} = α Z_{i} + v_{i} with M_{i} = ({, \begin{matrix} 1 if M_{i}^{*} > 0 \\ 0 otherwise \end{matrix})

where M i is a binary indicator variable that equals 1, if a household takes up MFI microcredit, and zero otherwise.…”

Section: Analytical Frameworkmentioning

confidence: 99%

Revisiting Microcredit's Poverty‐Reducing Promise: Evidence from Cambodia

Seng

2018

J of Intl Development

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This article analyses the effects of microcredit offered by microfinance institutions on household poverty in terms of household food consumption, with data from the Cambodia Socio‐Economic Survey conducted in 2014. The analysis is carried with an endogenous switching model accounting for endogenous selection bias resulting from unobservable confounders and for inherent differences between household borrowers and non‐borrowers in terms of food consumption functions. The results suggest that households, whether extremely poor, relatively poor or non‐poor, which take out microcredit, get worse off in terms of household food consumption per capita. Copyright © 2018 John Wiley & Sons, Ltd.

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“…The existence of MFIs is intended to avoid factory work with less secure wages (Bornstein, 1996); it also could minimize socioeconomic risks in low-income households through empowering women, increasing portfolio of assets and managing household consumption (Akotey and Adjasi, 2016;IFAD, 2011). On the other hand, the presence of microfinance institutions could overcome unexpected problems, although there is no certainty of potential to improve the welfare of the household (Armendariz and Morduch, 2010 (2005) concluded that the existence of MFI BMT Muamalat provided gross income to micro business creditors equal to 9.07% or Rp 70,000.00 per month.…”

Section: Several Studies Of the Impact Of Microfinancementioning

confidence: 99%