Response to Chemin and to Pitt

We reply to the discussion and criticisms of Matthieu Chemin (MC) and Mark Pitt (MP) to our paper ((Duvendack and Palmer-Jones (DPJ)) (all this issue). MC clarifies many issues which now make replication pure probable (but not yet achieved), and MP identifies a number of problems with DPJ (some of which are shared with Chemin, 2008). Chemin (2008) made at least one crucial undocumented and unrealistic assumption, and did not document many of his variable constructions. MP correctly identifies inappropriate members of control groups, and other problems, but his claim that his propensity score matching (PSM) results provide support for Pitt and Khandker's (1998 – PnK) most important claim is misleading as it is not robust. We see no reason to change our conclusion that PnK is limited as an evaluation of microfinance by a weak research design which cannot be convincingly mitigated by the sophisticated methods used in PnK, or by PSM.     

Gunfight at the Not OK Corral: Reply to ‘High Noon for Microfinance’

Duvendack and Palmer-Jones claim to replicate Chemin (2008) and Pitt and Khandker (1998) but obtain different results and hence challenge the two papers' estimates of the impact of microfinance in Bangladesh. This response details a number of reasons to demonstrate that Duvendack and Palmer-Jones is not a replication so their results provide no evidence about the validity of either of the earlier papers or on the effectiveness of microfinance.     

The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence

Abstract

We replicate and reanalyse the most influential study of microcredit impacts (M. M. Pitt & S. R. Khandker’s, ‘The impact of group-based credit on poor households in Bangladesh: Does the gender of participants matter?’, published in the Journal of Political Economy, 106, 1998). That study was celebrated for showing that microcredit reduces poverty, a much hoped for possibility (though one not confirmed by recent randomised controlled trials). We show that the original results on poverty reduction disappear after dropping outliers, or when using a robust linear estimator. Using a new program for estimation of mixed process maximum likelihood models, we show how assumptions critical for the original analysis, such as error normality, are contradicted by the data. We conclude that questions about impact cannot be answered in these data.     

Synergies between Different Types of Agricultural Technologies in the Kenyan Small Farm Sector

Sustainable intensification of agriculture will have to build on various innovations, but synergies between different types of technologies are not yet sufficiently understood. We use representative data from small farms in Kenya and propensity score matching to compare effects of input-intensive technologies and natural resource management practices on household income. When adopted in combination, positive income effects tend to be larger than when individual technologies are adopted alone. The largest gains occur when improved seeds are adopted together with organic manure and zero tillage. These results point at important synergies between plant breeding technologies and natural resource management practices.     

Exploring the Link Between Being Bullied and Adolescent Substance Use

Although research suggests that bullied adolescents may respond to victimization with substance use, much of this prior work has been cross-sectional. Using longitudinal data from a community-based sample, we examine the impact of early bullying victimization on the initiation of substance use in adolescence after considering the potential influence of selection effects using propensity score matching. After matching, there were moderate differences between victims of bullying and control students for cigarette smoking and alcohol use, which was limited to those exposed to higher levels of bullying. Being bullied in childhood appears to have only minor effects on the onset of adolescent substance use in this sample.     

Who Benefits? The Interactional Determinants of Microfinance’s Varied Effects

Since its emergence as a development tool, scholars and practitioners have questioned microfinance’s short- and long-term impacts but have had insufficient empirical evidence to assess them. To address this gap, this paper draws on mixed method research to assess the effects of microfinance loan and educational services over time. It explores why, even within the same microfinance institution (MFI), some borrowers benefit from microfinance services more than others in the short-term, and examines how this translates into long-term impacts. The article identifies understudied sources of intra-group variation: the diversity and choices of borrowers and MFI employees interacting with each other and their broader contexts.     

Microfinance and Poverty in Bolivia

Both in its institutional range and in its penetration of financial markets, the microfinance sector in Bolivia rivals any in the world, and has played a major part in extracting the macro-economy from meltdown since the mid-1980s. We seek specifically to assess its impact on poverty, and do this through small-sample surveys on four microfinance institutions, two urban and two rural, using a range of poverty concepts: income (generated both through the borrower's enterprise and through the labour market), asset holdings and diversity, and various measures of vulnerability. All the institutions studied had, on balance, positive impacts on income and asset levels, with income impacts correlating negatively with income on account of poor households choosing to invest in low-risk, low-return assets. Microfinance may, however, augment vulnerability: average debt-service ratios of microfinance clients are disturbingly high, and if the coping mechanisms used by borrowers fail, borrowers may be forced out of the microfinance system, possibly resulting in decapitalisation and impoverishment. Poorer households are more restricted in their choice of coping strategy, and many as a consequence 'choose' coping strategies more likely to jeopardise their long-term income prospects, in particular asset sales and cuts in children's schooling. The more successful low-income borrowers are those who have voluntary savings deposits and do not rush into fixed capital purchases too early: collapse back into poverty is associated with multiple crises and the failure of one or more 'safety nets', in particular of one or more 'safety nets', in particular support from a member's solidarity group. The following actions appear to be promising for the further reduction of poverty in Bolivia: stronger efforts to mobilise rural savings, removal of lower limits on loan size, and the introduction of appropriate insurance mechanisms. In comparison with other anti-poverty measures, microfinance appears to be successful and relative cheap at reducing the poverty of those close to the poverty line, but ineffective, by comparison with labour-market and infrastructural measures, in reducing extreme poverty.     

Effect of Parental Migration on the Academic Performance of Left Behind Children in North Western China

China’s rapid urbanisation has induced large numbers of rural residents to migrate from their homes in the countryside to urban areas in search of higher wages. As a consequence, it is estimated that more than 60 million children in rural China are left behind and live with relatives, typically their paternal grandparents. These children are called Left Behind Children (LBCs). There are concerns about the potential negative effects of parental migration on the academic performance of the LBCs that could be due to the absence of parental care. However, it might also be that when a child’s parents work away from home, their remittances can increase the household’s income and provide more resources and that this can lead to better academic performance. Hence, the net impact of out-migration on the academic performance of LBCs is unclear. This paper examines changes in academic performance before and after the parents of students out-migrate. We draw on a panel dataset collected by the authors of more than 13,000 students at 130 rural primary schools in ethnic minority areas of rural China. Using difference-in-differences and propensity score matching approaches, our results indicate that parental migration has significant, positive impacts on the academic performance of LBCs (which we measure using standardised English test scores). Heterogeneous analysis using our data demonstrates that the positive impact on LBCs is greater for poorer performing students.     

Contract Farming and Vulnerability to Poverty among Oil Palm Smallholders in Indonesia

This article addresses smallholder oil palm farming in Indonesia and the risk of falling into poverty by comparing contract and non-contract smallholders. We use an asset-based approach to define vulnerability and apply propensity score matching analysis to assess the impact of contract farming. Data were collected from a cross-sectional survey conducted in 2010 of 245 oil palm smallholder households, 126 of which were contract smallholders. The study finds that approximately 40 per cent of oil palm smallholders can be classified as stochastic-transient poor. We also show that while contract participation reduces the negative impact of oil palm price shocks, this is not the case for production shocks. The study concludes that despite positive income effects, contract smallholders also remain vulnerable to poverty.     

Microfinance and Gender: Issues,Challenges and The Road Ahead

Abstract

This special collection examines the claim that microfinance promotes gender equality. The focus is on three areas of the debate: first, the question of how successful microfinance has been in empowering women; second, whether and how negative gender discrimination operates within the sector; third, how power relations within and beyond the household shape the context and outcomes of microfinance initiatives. The papers in this collection demonstrate the divergence of circumstances and emphasise the need to go beyond the past searches for a simple narrative regarding the impact of microfinance. Rather, as the sector evolves and is incorporated into the mainstream financial system, the challenge ahead for researchers is to marshal the evidence on gendered dynamics to ensure that the gains made are built on through deeper understanding of why impact outcomes and processes differ and use this to inform new initiatives to further gender equality.     

Worker Empowerment Through Private Standards. Evidence from the Peruvian Horticultural Export Sector

In this paper we analyse the impact of a variety of private standards on worker empowerment in the horticultural export sector in Peru. Empowerment is defined as workers’ knowledge of their own rights and workers’ perceived agency to improve employment conditions. We use data from a company and a two-round employee survey, and difference-in-difference propensity score matching methods. We find positive effects of private standards on worker empowerment, with core labour standards having a more pronounced effect than standards with a small focus on labour, and thus complement previous evidence on the effects of standards on tangible employee wellbeing.     

Rural Roads and Local Market Development in Vietnam

We assess impacts of rural road rehabilitation on market development at the commune level in rural Vietnam and examine the geographic, community, and household covariates of impact. Double difference and matching methods are used to address sources of selection bias in identifying impacts. The results point to significant average impacts on the development of local markets. There is also evidence of considerable impact heterogeneity, with a tendency for poorer communes to have higher impacts due to lower levels of initial market development. Yet, some poor areas are also saddled with other attributes that reduce those impacts.     

Focus on Women in Microfinance Institutions

We provide empirical evidence on focusing on women in microfinance and its consequences for microfinance institutions (MFIs). Based on a global dataset, the results indicate that a focus on women is associated with group-lending methods, international orientation, smaller loans, and non-commercial legal status. We find that a focus on women significantly improves repayment but does not enhance overall financial performance because of higher relative costs. Moreover, the higher relative costs do not stem from servicing women per se but from the smaller loans offered to women and the group-lending methodology practised by MFIs focusing on women.     

Joint Land Certification Programmes and Women’s Empowerment: Evidence from Ethiopia

This paper connects two important development policy issues: women’s empowerment and land certification. We use propensity score matching to study the impact of the Ethiopian joint land registration and certification programme on women’s empowerment. Data are collected using surveys and a field experiment, enabling construction of complementary indices for empowerment. Our main result is that joint land certification has significant effects on women’s empowerment, particularly on dimensions that indicate female participation and roles outside the home. This result is robust to various sensitivity checks and alternative model specifications.     

Economic Effects of Migration on the Left-Behind in Cambodia

Using propensity score matching, this study examines the effects of migration on various indicators of household wellbeing in Cambodia. The results indicate that migration would reduce poverty headcount rate by 3–7 percentage points and decrease the depth of poverty. Migration is also found to reduce by 5–10 per cent the hours worked by members left-behind. The impact of migration on labour participation may be, however, vulnerable to unobservable factors. Nevertheless, the study suggests that important heterogeneous effects which differ from the average impact exist. The analysis is conducted separately by internal and international migration.     

Loan Officers’ Gender and Microfinance Repayment Rates

This study examines the impact of loan officer characteristics on repayment rates of microfinance borrowers in Mexico applying multilevel analyses, with special attention to the impact of the gender of the loan officer on default rates. The results strongly suggest that loan officers play a crucial role in improving repayment rates in microfinance and that male loan officers are better able to induce borrowers to repay than female loan officers. This may be because men exert authority over women and face fewer problems working late, travelling through unsafe places, and combining a position as counsellor with enforcing repayment.     

Transforming Gender Relations through the Market: Smallholder Milk Market Participation and Women`s Intra-household Bargaining Power in Ethiopia

We study the relationship between smallholder milk market participation and women`s intra-household bargaining position in Ethiopia, using a quasi-experiment and propensity score matching. In market participant households, milk income is higher and its control has shifted from women to men. Our data also indicate that men transfer this income partly to their wives. Qualitative findings indicate that men see this as recognition for their wife’s household maintenance responsibility. Women argue however that transferring income is also men`s tactic for reducing intra-household conflict. Overall, dependency between husbands and wives seems higher and a woman’s bargaining position stronger in participant households.     

Microfinancing the Developing World: how small loans empower local economies and catalyse neoliberalism's endgame

Co-finance has steadily grown to provide credit to hundreds of thousands of individuals living in third world countries. The spreading of and innovation within the microfinance sector demonstrates a successful neoliberal initiative that is both socially conscious and economically beneficial. By connecting groups of poor individuals to lending institutions or affluent individuals in developed countries, microloans have been able to foster the strengthening of local economies, necessary for consuming life-improving technology, while incurring minimal risk to the lending party. Criticisms of microfinance—both non-profit and for-profit models—appear misguided as there are clear data demonstrating both a low incidence of default and modest interest rates. Moreover, credit has been the foundation for modern economic growth. Ethical lending to the Third World should therefore not be denied, but rather intensified through the faculty of microfinance.     

Impacts of in-kind transfers on household food consumption: Evidence from targeted food programmes in Bangladesh

This article examines the impact of wheat transfers and cash incomes on wheat consumption and wheat markets. Using propensity score matching techniques, the MPC for wheat is on average 0.33, ranging form essentially zero for Food For Work (a programme with large transfers) to 0.51 for Food For Education. Econometric estimates indicate that the total marginal propensity to consume (MPC) wheat out of small wheat transfers to poor households is approximately 0.25, while MPCs for wheat out of cash income are near zero. This increase in demand for wheat reduces the potential price effect of the three major targeted programmes by about one-third.     

Weather Shocks and Urban Livelihood Strategies: The Gender Dimension of Household Vulnerability in the Kumi District Of Uganda

The Teso sub-region of Uganda suffered numerous weather shocks in the past, with devastating food security consequences. Using household fixed effects and propensity score matching methods, we analyse the impact of exposure to drought, flood and severe incidence of pests and diseases on household consumption expenditure per adult equivalent for a random sample of households from Kumi Town Council. We find that weather shocks reduce consumption by 17 per cent and that the consumption decline is significantly larger among female-headed households. We also find a higher likelihood of non-farm employment, borrowing and receiving remittances in order to cope with the shocks.