Assessing the Effect of Microfinance on Vulnerability and Poverty among Low Income Households

International audienceWe empirically investigate whether participation in Indian Self Help Group microfinance program (SHG) has helped reduced poverty and household vulnerability using cross-sectional SHG rural household survey data. The potential selection bias is eliminated by propensity score matching to estimate the average treatment on treated effect using nearest neighbour matching and local linear regression algorithm. We find that vulnerability in SHG members is not significantly higher than the non-SHG members, even though the SHG members have a high incidence of poverty. However, vulnerability declines significantly for those that have been SHG members for more than one year. These results are found to be robust using sensitivity analysis and Rosenbaum bounds method