| By: |
Miguel Niño-Zarazúa (Department of Economics, The University of Sheffield) |
| Abstract: |
In recent years, an important number of impact studies have attempted to
examine the effect of credit on income poverty; however, many of these studies
have not paid sufficient attention to the problems of endogeneity and
selection bias. The few exceptional cases have employed econometric techniques
that work at the village level. The problem is that the concept of village is
inappropriate in the urban context where a large percentage of microfinance
organisations in the developing world actually operate. This paper presents an
econometric approach which controls for endogeneity and self-selection using
data from a quasi-experiment designed at the household level, and conducted in
three urban settlements in the surroundings of the Metropolitan area of Mexico
City. The paper provides an estimation of the impact of credit, employing
different equivalence scales in order to measure the sensitivity of the
poverty impact to the intra-household distribution of welfare. We find a link
between poverty impacts and lending technology. Group-based lending programmes
are more effective in reducing the poverty gap but in doing so, they achieve
insignificant impacts on the poverty incidence. By contrast, individual
lending programmes reported significant and small impacts at the upper limits
of deprivation but insignificant impacts on the poverty gap. |
| Keywords: |
endogeneity, selection bias, microfinance, credit, income poverty, impact analysis, Mexico |
| JEL: |
C24 C81 O16 O17 O18 O19 |
| Date: |
2007–03 |
| URL: |
http://d.repec.org/n?u=RePEc:shf:wpaper:2007005&r=mfd |