Does Microfinance Cause or Reduce Suicides? Policy Recommendations for Reducing Borrower Stress

This paper explores the impact of microfinance on suicides, against the backdrop of suicides by microfinance borrowers in India.

Political pressure to hit outreach numbers created stress among NGOs who feared their subsidies would be cut if they did not expand sufficiently. The paper reviews literature and investigates data on suicide in India and globally. It states that:

• Research on suicides brings out the importance of psychological factors, divorce and unemployment;
• Time series data on suicides in India find significantly positive correlation with male suicide rates, but no relation between microfinance and total suicides;
• Cross-sectional data of Indian states indicates a significant positive correlation of total suicides with number of SHGs' loans outstanding to banks;
• Global country-wide analysis indicates that there is no correlation between microfinance and male or female suicides;
• Regression analysis of 31 countries indicates that microfinance penetration among the poor is a causal factor for increased suicides.

The paper highlights the need for MFIs, the social security system and regulators to focus on the human angle.