Paper

Micro-Credit, Risk Coping and the Incidence of Rural-to-Urban Migration

The effect of migration and microfinance on the economy of a household
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This paper presents the key outcomes of a study conducted on the rural poor of South East Asia (Bangladesh) and discusses:

  • The phenomenon of seasonal employment;
  • The risks faced by a household from this;
  • The manner in which migration has emerged as one of the most common practices to counter it.

Further, it discusses how microfinance, and the employment it generates, are viewed as a means to prevent migration. It then brings out the alternate theory (hypothesis) that:

  • Members of the household might seasonally migrate even when microfinance services are made available, there being complementary effect of doing both the activities as it leads to diversification of income risks, thus generating higher economic value for the household.

The paper then models the alternative investment decisions of a representative farm household in the following areas:

  • Choice of benchmark;
  • Decision of the household on entrepreneurship;
  • Joint investment in both the activities;
  • Situation when rural innovation facilitates migration.

It presents the empirical representation of the investment decision through a regression model, and then examining the choice of data and variables, interprets the results of the study. The final section of the paper covers the conclusions where it presents a partial analysis. It concludes that:

  • The hypothesis is true for all the data analyzed, except for the population that earns less than $100 per capita, as this population is not able to reap the benefits of diversification.

About this Publication

By Ahsan, Q.
Published