The Effect of Microfinance on Human Capital Formation: Evidence from Rural Thailand Sana

In this paper, I test the impact of microfinance loans on education spending of 1200 households from 64 towns and villages in Thailand. I compare the expenditure on education amongst households that borrow from only MFIs, only non-MFIs and both sources of loan by using data from Townsend Thai Project.1 The results of the paper indicate that households that borrow from MFIs are more likely to spend on education, especially the households with female borrowers. However, the spending on education varied depending on the individual and household characteristics such as family income, child’s age and gender, the gender of loan taker, and the specific lending organization. This study makes important contributions to our understanding of how to more effectively foster the development of human capital through microfinance by analyzing the channels through which microfinance loans influence household spending on education