Micro Credit Intervention in Rural Poor Households and Its Effects on Household Vulnerability to Poverty

Empirical studies have suggested the possibility of fuelling vulnerability among households by microfinance programmes through indebting the poor. Hulme and Mosley (1996) found that there exists a tradeoff between changes in income and vulnerability for poor households: Poverty-as measured by income can be reduced by borrowing, but such debt can make the poor more vulnerable because of the added risks associated with borrowing. This study set out to establish if there exists any direct relationship between microfinance and vulnerability to poverty. We constructed a relative wealth index and a relative poverty line, and observed households over a period of eighteen months. We used a Probit model to estimate the probability that a household becomes vulnerable in future. Both participants in microfinance and non participants were included in the study. Poorer people tended to take smaller loans with a more frequent repayment period.
Des études empiriques ont suggéré la possibilité d’entretenir la vulnérabilité des ménages par les programmes de microfinance par le biais d’endettement des pauvres. Hulme et Mosley (1996) ont trouvé qu’il existe un compromis entre la modification des revenus et la vulnérabilité des ménages pauvres: la pauvreté, telle que mesurée par le revenu, peut être réduite par l’emprunt, mais cette dette peut rendre le pauvre plus vulnérable à cause des risques accrus liés à l’emprunt. Cette étude visait à établir s’il existe une relation directe entre la microfinance et la vulnérabilité à la pauvreté. Nous avons construit un indice relatif de richesse et un seuil relatif de pauvreté, et observé les ménages sur une période de dix-huit mois. Nous avons utilisé un modèle Probit pour estimer la probabilité qu’un ménage devienne vulnérable dans l’avenir. Les participants à la microfinance et les non-participants ont été inclus dans l’étude. Les plus pauvres ont tendance à prendre de petits prêts avec une période de remboursements plus fréquents.
Extended Abstract for Cross Cutting Fields
Date of publication: 
Region Focus: 
East Africa
RUFORUM Conferences and Workshops
Licence conditions: 
Open Access
Printed resource

The 2012 RUFORUM Biennial Conference is the third in the series. The main objective of the Biennial conferences is to provide a platform for agricultural research for development stakeholders in Africa and beyond to actively exchange findings and experiences, while at the same time learning lessons towards improving performance of the agricultural sector and ultimately people’s livelihoods. The biennial conference is RUFORUM’s most comprehensive meeting for the diversity of stakeholers in agriculture. It is especially dedicated to graduate students and their supervisors, grantees in RUFORUM member universities and alumni. It is a platform for peer review, quality control, mentorship, networking and shared learning. The third Biennial Conference was attended by 657 participants.  This record contains an extended abstract accepted under the theme of Cross Cutting Fields.