Paper

The Very Poor Who Participate in Microfinance Institutions and Those Who Never Did: A Comparative Analysis

Examining financial market participation of the very poor
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This paper examines the financial market participation of the very poor, focusing in particular on their participation in MFIs. It compares very poor people who participate in MFIs with those who never have. The study uses data from Bangladesh Rural Advancement Committee (BRAC) program targeted at the very poor.

The study reveals that the poorest who participate in MFIs are relatively better off than those who never participated, although the causal relationship is not clear. Findings include:

  • Poorest people who participate in MFIs borrow more from informal sources, suggesting a complementary, rather than a substitution relationship between the two sources of finance;
  • Intensity of microcredit borrowing is lower and tendency to drop out from one and not rejoin other MFIs is higher among the very poor who participate in MFIs.

The paper concludes that a better understanding of the overall financial market participation of the very poor and the differences between the very poor who participate in microfinance programs and those who do not can be important for guiding policy and practice.

About this Publication

By Matin, I.
Published