Too Vulnerable for Microfinance? Risk and Vulnerability as Determinants of Microfinance Selection in Lima

Too Vulnerable for Microfinance? Risk and Vulnerability as Determinants of Microfinance Selection in Lima

Author: 
Pearlman, Sarah
Publisher: 
Taylor & Francis
Date published: 
2012
Record type: 
Journal Title: 
Journal of Development Studies
Source: 
The Journal of Development Studies, Vol. 48, Issue 9, September 2012, pp. 1342-1359
Abstract: 

Despite dramatic microfinance growth, formal credit use by poor households remains low. There is increasing evidence of muted demand, suggesting a link between the risk of projects financed by credit and households' risk management. This article analyses these links using panel data on urban microentrepreneurs in Lima, based on a model in which the risk of projects and the ability to manage risk determine if a household seeks microfinance. Controlling for unobservable traits like risk aversion and skill, results suggest that more vulnerable entrepreneurs are significantly less likely to use microfinance than their less vulnerable counterparts.

Language: 

CITATION: Pearlman, Sarah. Too Vulnerable for Microfinance? Risk and Vulnerability as Determinants of Microfinance Selection in Lima . : Taylor & Francis , 2012. The Journal of Development Studies, Vol. 48, Issue 9, September 2012, pp. 1342-1359 - Available at: https://library.au.int/too-vulnerable-microfinance-risk-and-vulnerability-determinants-microfinance-selection-lima-4