Does microcredit improve wellbeing? Evidence from Indonesia

Abstract

Purpose This study aims to investigate whether microcredit programme has a positive impact on productive poors. Several areas of investigation include clients’ borrowing behaviour, level of savings and before-and-after psychological well-being comparison. Design/methodology/approach A case-study survey of 398 clients of a microcredit programme run by a charity organisation in Jakarta, Indonesia, was conducted in 2012. Descriptive statistics and cross-tabulation analyses were then performed to show the variation of different variables among the respondents and how they correlate with socio-demographic indicators. Findings The result shows an indication that microcredit brings positive impact on the clients’ welfare; however, the effect is not linear and there might be an optimum borrowing frequency. Moreover, the output also suggests that age, level of income and level of savings are three important determinant of borrowing behaviour. Research limitations/implications Although the result can be justified, it is necessary to be cautious about its generalisability because of limited number of sample and non-randomised sample selection. Originality/value Although the microcredit programme examined in this study has been operating since 2010, there is by far no comprehensive study to assess its impact on the welfare of the clients. This study attempts to fill in the gap by providing an analysis on how microcredit programme increases the welfare of the clients. In addition, as part of the continuous improvement programme, the study also identifies a number of factors that might indicate the clients’ borrowing behaviour.

Microcredit and Economic Welfare: Experience of Poor Rural Households from Pakistan

“…Like most Asian developing states, the majority of the poor populace in Pakistan live in rural areas, and poverty remains one significant challenge to the society. Inability to acquire formal credit support has often been argued as a crucial constraint in expanding farmers' production, which mostly restrains farmers from improving their living conditions in Pakistan (Coleman, 1999;Gale & Collender, 2006;Rokhim, Sikatan, Wibisono Lubis, & Setyawan, 2016). The loan conditions established by formal financial institutions usually exclude the poor farmers who farm on the non-secured lands and possess little tangible assets that can be offered as collateral for formal loans.…”

Access To Finance And Microenterprise Growth: Evidence From Microcredit Client In Urban Malaysia

“…Terengganu reported that most of the clients borrowed for two times. Meanwhile, in other regions such as Indonesia, Rokhim et al (2016) found that the highest borrowing frequency of the clients was between one to three times, while the remaining borrowed for four times or more. The results in Table 2 shows that most of the clients are first-time borrowers and have received the credit loans in 2016.…”

Gender disaggregated effects of microcredit on capital accumulation in rural households

“…Findings from the above studies show that prior research has been inconclusive in establishing a clear pattern of long-term contribution of microcredit to its recipients (Pitt and Khandker, 1998;Kiiza and Pederson, 2006;Rokhim et al, 2016;Shiferaw et al, 2017). Furthermore, not many such studies have been undertaken that focus on gender disaggregated effects [3] of microcredit and capital accumulation; hence, this study fills this gap and shows the direct implication of policy changes that promote microcredit financing.…”