Does Microfinance Cause or Reduce Suicides? Policy Recommendations for Reducing Borrower Stress
Burgundy School of Business - CEREN
Burgundy School of Business
Philipp E. Otto
European University Viadrina
March 3, 2011
At a time when suicides by microfinance borrowers in Andhra Pradesh are extensively discussed, this paper makes an initial tentative exploration into the impact of microfinance on suicides. Does MF reduce or increase suicides? Data limitations imply methodological limitations and provisional conclusions. The literature review, starting with Emile Durkheim, of research on suicides brings out the importance of psychological factors, divorce, and unemployment. We investigate time series data on suicides in India and find a just significantly positive correlation with male suicide rates and slightly negative correlations (not significant) with female suicide rates – but no relation between microfinance and total suicides. Cross-sectional data of Indian states indicates a significant positive correlation of total suicides with number of SHGs loans outstanding to Banks, higher than with microfinance loans provided by MFIs, which only shows a weak correlation. Going beyond India, a global country-wise analysis indicates that there is no correlation between microfinance and male or female suicides, yet regression analysis of 31 countries (weakly) indicates that microfinance penetration among the poor is a causal factor for increased suicides. Three related questions are discussed. First, do rapid growth and sustainability aims make MFis forget the human angle? Second, is social pressure necessary to make people repay? Third, if Microfinance increases suicides, is this impact to be differentiated between women and men possibly due to changing roles? Based on these, we tentatively propose policy recommendations.
Number of Pages in PDF File: 30
Keywords: Microfinance, Microcredit, Impact, Suicide, Development, Over-Indebtedness, Group Lending, Health
JEL Classification: O1, O17, O5working papers series
Date posted: November 26, 2010 ; Last revised: March 7, 2011
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