Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2010:23: Reducing Vulnerability through Microfinance: Evidence from Indian Self Help Group Program

Ranjula Bali Swain () and Maria Floro ()
Additional contact information
Ranjula Bali Swain: Department of Economics, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Maria Floro: Department of Economics, American University, Postal: 4400 Massachusetts Avenue NW, Washington DC 20016,

Abstract: We investigate if participation in Indian Self Help Group microfinance program (SHG) results in reducing vulnerability. Vulnerability estimates are constructed using cross-sectional SHG rural household survey data, collected in 2003. The potential selection bias is eliminated by propensity score matching to estimate the average treatment on treated effect using nearest neighbour matching and local linear regression algorithm. We find that despite a disproportionately high percentage of poor in the SHG members, vulnerability is not significantly different between the SHG and non-SHG members. This result is found to be robust using sensitivity analysis and Rosenbaum bounds method.

Keywords: Microfinance; Vulnerability; Poverty; Self Help Groups

JEL-codes: D14; G21; I32

32 pages, December 10, 2010

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