Revisiting Microcredit's Poverty‐Reducing Promise: Evidence from Cambodia

Abstract

This article analyses the effects of microcredit offered by microfinance institutions on household poverty in terms of household food consumption, with data from the Cambodia Socio‐Economic Survey conducted in 2014. The analysis is carried with an endogenous switching model accounting for endogenous selection bias resulting from unobservable confounders and for inherent differences between household borrowers and non‐borrowers in terms of food consumption functions. The results suggest that households, whether extremely poor, relatively poor or non‐poor, which take out microcredit, get worse off in terms of household food consumption per capita. Copyright © 2018 John Wiley & Sons, Ltd.

Multilevel latent class modeling to segment the microfinance market

“…The topic of microfinance is generating a lively debate in the reference literature on its efficacy (Khavul, 2010;Bateman & Chang, 2012;Garikipati, 2017;Cull & Morduch, 2017;Seng, 2018), and many researchers acknowledge its importance and the value of social participation in poverty alleviation (Newman, et al, 2014;Banerjee et al, 2015a;Banerjee et al, 2015b;Chen et al, 2017). Previous reports have been unable to demonstrate that it is effective in helping people emerge from poverty, but there is a consensus that microfinance gives to the poor entrepreneurs a greater degree of freedom to make choices and obtain financial investments, since they do not have access to formal banks (Newman et al, 2014;Mersland & Strøm, 2010;Garikipati, 2017).…”

“…This attitude can turn clients into defaulting borrowers because their having used the credit to cover other needs can lead to a situation where they are unable to raise capital to cover the loan (Chen et al, 2017). That is why Chen et al (2017) and Seng (2018) suggest that microfinance may not always generate positive results for borrowers. Bateman and Chang (2012) are much more severe in their criticism, claiming that microfinance is a weapon of neoliberalism, a "trap for the poor".…”

‘If You Fall, Stand Up Again’: The Moral Nature of Financial Literacy in the Global South

“…Over the past decade over‐indebtedness has grown considerably, and Cambodia has recently become a focal point for conversations about over‐indebtedness among microcredit borrowers (Bateman, 2017; Bylander, 2015; Liv, 2013; Rozas, 2016). In 2012 as many as a quarter of borrowers in saturated areas were experiencing over‐indebtedness (Liv, 2013), and since this time over‐indebtedness has become an even greater economic, social and political concern (Bylander et al., 2019; see also Seng, 2017, 2018). Over the past two years delinquency rates and non‐performing loans have increased across the sector, and industry experts suggest that the sector is over‐heated, and thus at risk of crisis.…”

Rural financial development, spatial spillover, and poverty reduction: evidence from China

“…The second group of researchers asserts that rural financial development has no impact on poverty reduction, and even exacerbates income inequality (Hermes, 2014;Khandker & Koolwal, 2010;Seng, 2018;Seven & Coskun, 2016). For instance, Khandker and Koolwal (2010) found that although both formal and informal credits increased non-farm incomes, they did not decrease the number of extremely poor households overall.…”

“…Seven and Coskun (2016) reached similar conclusions. Seng (2018) argued that extremely poor households that acquired microcredit fared worse in food consumption. Hussain and Thapa (2012) argued that the negative effect of rural credit primarily owed to institutional constraintsfarmers with considerable landholdings and family assets are more likely than smallholders to obtain formal credit at lower transaction costs.…”