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Tuesday, 30 August 2011

Does microfinance lead to self employment?

Yes. According to recent empirical evidence from Bangladesh :
The researchers, policy makers, the practioners as well as well-wishers of economic development have a lot of interest to learn about the role of MFIs in promoting entrepreneurship. The household liquidity constraints impede to accumulate assets in order to start viable businesses. Our results suggest that the relaxation of such constraints by means of expanding access to fi nance prompts households to move toward self-employment. Such movement does not take place at a time. Rather, access to credit of the poor households initially brings the non-productive household members into productive sector, mainly in self-employment activity. Such opportunity creates new income opportunity in relative to wage income. The returns to self employment than attract the households to be solely self employed in the long run to receive the windfall gain from self-employment activity.
The study draws from a large sample of Bangladesh households on  micro-credit programs (and control group of non-participants). A range of statistical techniques are then employed to assess the likelihood that microfinance directly induces self-employment activity and maximises the households' economic gain, controlling for asset structure of the households (e.g. landholdings, savings, education). The result has to be tested in other contexts, and for different types of microfinance initiatives, but it is important because it potentially suggests that microfinance may not only generate employment but potentially can genuinely help with creation of new businesses.  

1 comment:

  1. I.P.A. Manning (Chosanganga)31 August 2011 at 08:30

    Bangladesh has simply placed its women under the tyranny of their husbands. It is a form of evangelism that does no good

    And it will not achieve the MDG. We must look at the alternative way.


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