nep-mfd New Economics Papers
on Microfinance
Issue of 2010‒07‒17
five papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Financial access, precaution, and development: Theory and evidence from India By Scott Fulford
  2. Exploring the long-term impact of development interventions within life-history narratives in rural Bangladesh By Davis, Peter
  3. Crop Insurance in India By Gurdev Singh
  4. An experiment on the impact of weather shocks and insurance on risky investment By Hill, Ruth Vargas; Viceisza, Angelino
  5. Impact of farmer field schools on agricultural productivity and poverty in East Africa By Davis, Kristin; Nkonya, Ephraim; Kato, Edward; Mekonnen, Daniel Ayalew; Odendo, Martins; Miiro, Richard; Nkuba, Jackson

  1. By: Scott Fulford (Boston College)
    Abstract: Although many think of extending financial access as a means of reducing poverty, empirical studies have produced contradictory results. One problem that many studies share is that they cover only a short time frame and do not examine dynamic effects. I show that allowing effects to differ over time is crucial to understanding changes in access to credit when precautionary motives are important. While the introduction of credit initially creates a boom in consumption and reduces poverty, in the long term credit reduces mean consumption because access to credit reduces the steady state stock of wealth. Using consistent consumption data that cover a much longer time period than most studies, my empirical findings show that increased access to bank branches in rural India increased consumption initially, but consumption later fell, although the long term effect was still slightly positive.
    Keywords: financial access, precaution, development, India
    JEL: O16 D91
    Date: 2010–06–15
  2. By: Davis, Peter
    Abstract: This paper explores the long-term effects of a set of development interventions within the life trajectories of people in rural Bangladesh, using findings from 293 life-history interviews and an accompanying set of focus group discussions conducted in 2007. The paper uses various methods to address the challenge of assessing the long-term impact of development interventions. It then goes on to discuss what was learned about the impact of microfinance, educational transfer, and agricultural technology development programs from the life-history narratives. The life-history interviews show that microfinance services are now widespread in rural Bangladesh, with 55 percent of research participants having used these services for some kind of income-generating activity at some time. Microfinance contributed to at least one of the three or four most important causes of well-being improvement within the life trajectories in 18 percent of research participants. However, 37 percent of research participants used microcredit to cope with crises or to maintain consumption, rather than to generate income. Educational transfers, such as food for education and cash for education, were also viewed positively by research participants and were seen as contributing positively in the life histories of 29 percent of participants. However, educational transfers were listed as a main cause of life improvement for only 7 percent of participants. The impact of educational transfers was limited by the relatively low monetary value of the benefits received as compared with other, more important contributors of improvement. Most research participants receiving educational transfers reported that the funds were used to help with education expenses, food, and children’s clothing, with some participants reporting that without these funds, their children may have had to withdraw from school. The life-history interviews detected little long-term benefit from the agricultural technology programs, and a number of reasons for this fact are discussed in the paper.
    Keywords: development interventions, Microfinance, Poverty,
    Date: 2010
  3. By: Gurdev Singh
    Abstract: This working paper discusses the dependence of Indian agriculture on uncertain rains. In addition the farmers experience other production risks as well as marketing risks related to different crop enterprises and for different agro-climatic regions and areas. It then argues on the need for crop insurance as an alternative to manage production risk. It then takes up the historical overview of crop insurance products and their performance. It is followed by the discussion on the currently available crop insurance products for specific crops and regions. It discusses at length the two important products, namely, National Agricultural Insurance Scheme and Weather Based Insurance Scheme. It also reflects on some deficiencies in these products. [W.P. No. 2010-06-01
    Keywords: Indian agriculture,uncertain rains, crop enterprises, crop insurance, agro-climatic regions, performance, National Agricultural Insurance Scheme, Weather Based Insurance Scheme
    Date: 2010
  4. By: Hill, Ruth Vargas; Viceisza, Angelino
    Abstract: We conduct a framed field experiment in rural Ethiopia to test the seminal hypothesis that insurance provision induces farmers to take greater, yet profitable, risks. Farmers participated in a game protocol in which they were asked to make a simple decision: whether to purchase fertilizer, and if so, how many bags. The return to fertilizer was dependent on a stochastic weather draw made in each round of the game protocol. In later rounds of the game protocol, a random selection of farmers made this decision in the presence of a stylized weather-index insurance contract. Insurance was found to have some positive effect on fertilizer purchases. Purchases were also found to depend on the realization of the weather in the previous round. We explore the mechanisms of this relationship and find that it may be the result of both changes in wealth weather brings about and changes in perceptions of the costs and benefits of fertilizer purchases.
    Keywords: Fertilizer, field experiment, hypothesis, input response, Insurance,
    Date: 2010
  5. By: Davis, Kristin; Nkonya, Ephraim; Kato, Edward; Mekonnen, Daniel Ayalew; Odendo, Martins; Miiro, Richard; Nkuba, Jackson
    Abstract: Farmer field schools (FFSs) are a popular education and extension approach worldwide. Such schools use experiential learning and a group approach to facilitate farmers in making decisions, solving problems, and learning new techniques. However, there is limited or conflicting evidence as to their effect on productivity and poverty, especially in East Africa. This study is unique in that it uses a longitudinal impact evaluation (difference in difference approach) with quasi-experimental methods (propensity score matching and covariate matching) together with qualitative approaches to provide rigorous evidence to policymakers and other stakeholders on an FFS project in Kenya, Tanzania, and Uganda. The study provides evidence on participation in FFSs and on the effects of FFSs on various outcomes. The study found that younger farmers who belong to other groups, such as savings and credit groups, tended to participate in field schools. Females made up 50 percent of FFS membership. Reasons for not joining an FFS included lack of time and information. FFSs were shown to be especially beneficial to women, people with low literacy levels, and farmers with medium-size land holdings. FFS participants had significant differences in outcomes with respect to value of crops produced per acre, livestock value gain per capita, and agricultural income per capita. FFSs had a greater impact on crop productivity for those in the middle land area (land poverty) tercile. Participation in FFSs increased income by 61 percent when pooling the three countries. FFSs improved income and productivity overall, but differences were seen at the country level. Participation in FFSs led to increased production, productivity, and income in nearly all cases: Kenya, Tanzania, and at the project level (all three countries combined). The most significant change was seen in Kenya for crops (80 percent increase) and in Tanzania for agricultural income (more than 100 percent increase). A lack of significant increases in Uganda was likely due to Uganda’s National Agricultural Advisory Services. When disaggregating by gender, however, female-headed households benefited significantly more than male-headed households in Uganda.
    Keywords: farmer field schools, agricultural productivity, adoption, extension services,
    Date: 2010

This nep-mfd issue is ©2010 by Olivier Dagnelie. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.