Does microfinance move the households toward self employment?

Khaleque, Abdul (2011): Does microfinance move the households toward self employment?

Abstract

The present study is based on 5208 observations, which is comprised of participant households of microcredit programs, non-participant households of program villages as well as non-participant households from control villages. We found that among the participant households 37% depend on wage as well as self employment activity and 20% is solely dependent on self-employment activity and the remaining depends on dual activity (self-employment as well as wage employment), but among the non-participant households 60% is solely dependent on day labor activity. To find the link between occupation selection and microfinance participation, we use simple as well as multiple regression models like logit, multinomial logit, seemingly unrelated regression, etc. The regression results based on earnings from the elective occupations or number of days worked in that occupation suggests that the surveyed participant households have higher likelihood of being self-employed or to maintain self-employment as well as wage employment at a time to increase their welfare. The shifters due to relaxation of credit constraint or proliferation of access to credit moves toward sole self-employment activity with higher likelihood than the dual activity – to be employed in self-employment as well as wage employment within a given time span. In compendium, we can lucidly claim from this paper that beyond the asset structure of the households such as landholdings, savings, education, etc., the microfinance directly induces self-employment activity or transfer available working days from the day labor activity to self-employment activity and maximize their economic gain such as higher income, savings etc.

• Item Type: MPRA Paper
• Language: English
• Keywords: Credit, Self-employment, Logit, Multinomial logit, Seemingly Unrelated Model
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand

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