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The Impact of Microfinance on Household Livelihoods: Evidence from Rural Eritrea

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Development Finance

Abstract

This study examined the impact of microfinance on the livelihoods of households in rural Eritrea. It specifically sought to find out whether the Saving and Microcredit Programme (SMCP), introduced by the Eritrean Government in 1996 to support the poorest of the poor, had a significant impact on the livelihood of its clients. The study employed logistic regression and propensity score matching estimation techniques. The findings reveal that households that participated in the SMCP had reported significantly higher profits from their microenterprises, had more valuable assets, higher consumption expenditure, significantly improved nutrition and increased savings. The findings have important social and economic policy implications regarding the role of finance in rural development in an African context.

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Notes

  1. 1.

    Data are for the most recent year available during the period specified.

  2. 2.

    The ATT requires finding matches for the treated observation. The ATT is computed as the mean impact of the treatment variable on the treated.

  3. 3.

    According Austin (2009), the standardised difference is defined as follows;

    For continuous variables:

    $$d = \frac{{\left( {\bar X{\textrm{treatment}} - \bar X{\textrm{control}}} \right)}}{{\sqrt {\frac{{S^2 {\textrm{treatment}} + S^2 {\textrm{control}}}}{2}} }}$$

    For dichotomous variables:

    $$d = \frac{{\left( {\hat P{\textrm{treatment}} - \hat P{\textrm{control}}} \right)}}{{\sqrt {\frac{{\hat P{\textrm{treatment}}\left( {1 - \hat P{\textrm{treatment}}} \right) + \hat P{\textrm{control}}\left( {1 - \hat P{\textrm{control}}} \right)}}{2}} }}$$

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Habte, A., Visser, K., Ocran, M.K. (2017). The Impact of Microfinance on Household Livelihoods: Evidence from Rural Eritrea. In: Biekpe, N., Cassimon, D., Mullineux, A. (eds) Development Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-54166-2_4

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  • DOI: https://doi.org/10.1007/978-3-319-54166-2_4

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