Gender disaggregated effects of microcredit on capital accumulation in rural households

Purpose: The purpose of this paper is to contribute to the literature on microcredit impacts by quantifying the gender disaggregated effects of long-term borrowing on capital accumulation in order to address the existing gap. Separate models are estimated for male-headed and female-headed households to determine if the effects of microcredit differ between these gender types. Design/methodology/approach: The paper adopts the method proposed by Deaton (1990) in which he specifies a model without borrowing restrictions whereby the household maximizes an inter-temporal utility function. To account for self-selection and endogeneity of micro credit, the fixed effects instrumental variable approach is used. Data are disaggregated by gender and analyzed separately. Findings: The paper finds that micro credit indeed increases productive assets and human capital but has no significant effect on non-productive assets. One striking result is that after disaggregating the data by gender, the authors find no effect of micro credit on women-headed households. Practical implications: The paper provides an empirical evidence for the need to address gender issues in finance and lending. Furthermore, targeted lending particularly to women makes a great difference in the fight against poverty. Originality/value: This paper fills the gap on gender and micro credit impacts on capital accumulation in a developing country context.