Financial deepening, especially through the microfinance revolution, has been one of the boldest and most promising global evolutions over the last decades. My thesis aims at building up the knowledge about the direct and indirect impacts of finance at the micro level, and especially about the mechanisms and welfare implications thereof. My thesis consists of three chapters. The first one focuses on the potential spillover effects that the entry of microfinance institutions can generate at the level of local informal credit markets. Using a standard model of lending in presence of adverse selection, I show that MFIs can trigger an increase in the equilibrium interest rate of the informal market. Using data from Indian villages, I provide supporting evidence fro the main predictions of the model. The second chapter investigates the impact of microfinance participation in India on educational outcomes. It is based on a unique long-term panel database on members of informal credit and saving associations, known as SHGs, in villages of Jharkhand, India, in which households were interviewed every two years between 2002 and 2009. Combining panel and propensity-score matching techniques, we find that members of SHGs are significantly more likely to enroll their children in school. However, the treatment effects take time to materialize (about five years on average) and are essentially concentrated on girls. The final chapter looks at the insurance aspect of SHGs. Using the same database as in chapter 2 combined with meteorological data, I study the extent and the nature of the reaction to rainfall shocks of rural households with and without access to microcredit. I find that member households enjoy a stable access to credit, opening the possibility of short-term consumption smoothing following an adverse rain shock.
- Self-Help Groups
- Informal credit markets