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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Jürges, Hendrik / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias


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Microfinance and Vulnerability to Seasonal Famine in a Rural Economy: Evidence from Monga in Bangladesh

Claudia Berg / M. Shahe Emran
Published Online: 2020-02-01 | DOI: https://doi.org/10.1515/bejeap-2018-0359

Abstract

This paper uses a unique data set on 143,000 poor households from Northern Bangladesh to analyze the effects of microfinance membership on a household’s ability to cope with seasonal famine known as Monga. We develop an identification and estimation strategy that exploits a jump and a kink at the 10-decimal land ownership-threshold driven by the Microfinance Institution screening process to ensure repayment by excluding the ultra-poor. Evidence shows that microfinance membership improves food security during Monga, especially for the poorest households who survive at the margin of one and two meals a day. The positive effects on food security are, however, not driven by higher income, as microcredit does not improve the ability to migrate for work, nor does it reduce dependence on distress sale of labor. The evidence is consistent with consumption smoothing being the primary mechanism behind the gains in food security of MFI households during the season of starvation.

This article offers supplementary material which is provided at the end of the article.

Keywords: microfinance; ultra-poor; seasonal famine; Monga; coping mechanisms; food security; distress sale of labor; short-term migration; local 2SLS

JEL Classification: O1; I3

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About the article

Published Online: 2020-02-01


Citation Information: The B.E. Journal of Economic Analysis & Policy, 20180359, ISSN (Online) 1935-1682, DOI: https://doi.org/10.1515/bejeap-2018-0359.

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