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Does Microcredit Matter? Evidence from India

Does Microcredit Matter? Evidence from India. Supriya Garikipati University of Liverpool. Microcredit Programs. They lend small sums of money to individuals as members of group They rely on group liability to ensure repayment They subsidise administrative costs rather than interest rates

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Does Microcredit Matter? Evidence from India

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  1. Does Microcredit Matter? Evidence from India Supriya Garikipati University of Liverpool

  2. Microcredit Programs • They lend small sums of money to individuals as members of group • They rely on group liability to ensure repayment • They subsidise administrative costs rather than interest rates • Loans are repaid in weekly instalments GRAMEENBANK

  3. The Microcredit DebateDoes Microcredit Make a Difference? • 1980s: Repayment Rates • 1990s: Poverty Alleviation • 2000s: Empowerment and Sustainability • This paper evaluates vulnerability reducing and empoweringpotential of one such prog

  4. Microcredit in India • More or less on lines of Grameen model • Groups are larger (average 15 members) • Various sources of finance (Banks, Commercial Institutions and NGO) • Started in early 1990s • As of 2002 there are 12 million members • Sponsor led evaluation studies (Motivation)

  5. Method • Household Survey: 302 Households 2001 and 2002 Client-Control Group • Client Survey: 397 Clients 2002 Understand the Findings • Key Informants: 38 Women 2002 and 2003

  6. Classify Households (302)

  7. Measuring Household Vulnerability

  8. Percentages and Means of Study Variables of Client and Control Group Households (sig at 10% or better)

  9. Measuring Empowerment

  10. Percentages and Means of Empowerment Indices of Client and Control Group Women

  11. Percentages and Means of Time-Use of Client and Control Group Women

  12. Personal testimonies • Change in attitude own capability and worth (own perception and others) • Confidence in a network (emergencies and risk sharing) • Change in standard of living • Improved bargaining position

  13. ClassifyClients (397) Explaining the ‘Great Divide’

  14. Loan Usage Primary Loan Usage by Income Group (% of Women)

  15. Some Indications • Most use loans on family ventures but • For the poor consumption is important • For the non-poor own business is important Non-poor more empowered and also more likely to use loans on own business

  16. Determinants of Loan Usage: Logistic Models (N = 386)

  17. The Main Findings • Non-poor clients who control loans • Non-poor clients who do not control • Poor clients irrespective of control Followed up by personal testimonies If loans used for consumption and non-productive asset creation then how do clients manage repayments?

  18. Repayments Major source of repayment by loan usage (%)

  19. Plus Personal Testimonies • Own-business Repay from source but only those women investing together make profit • Others Repayment is difficult, work for wages or sell assets Challenging existing women’s intra-household position • Decision on allocation of her labour • Say over sale of assets

  20. Policy Interventions • Poor Protection against risk • Non-Poor Variety and Flexibility

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