Does Microfinance Help the Ultrapoor Cope with Seasonal Shocks? Evidence from Seasonal Famine (Monga) in Bangladesh
The paper analyzes whether microfinance helps the ultra poor cope with aggregate shocks such as seasonal famine. It employs a unique data set on 150,000 ultrapoor households and uses the seasonal famine (Monga) in Northern Bangladesh as a case study. The study discusses the impact of microfinance membership on a number of economic indicators that are informative about a household's ability to cope with famine.
The paper provides evidence that microfinance confers significant benefits to ultrapoor households in coping with seasonal famine. The evidence presented by the authors implies that microfinance:
- Reduces the probability of short-term migration in search of work during famine;
- Decreases the need for advanced labor sale at low wages;
- Creates employment opportunities within the household, and thus a member household is less vulnerable to seasonal shock to the demand for agricultural labor.
The paper, however, also suggests that microfinance membership may not have any robust effect on the food security of the poorest of the poor.
