Gender disaggregated effects of microcredit on capital accumulation in rural households: Evidence from Uganda

Abstract

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.

Citation

Isoto, R.E. and Kraybill, D.S. (2019), "Gender disaggregated effects of microcredit on capital accumulation in rural households: Evidence from Uganda", Agricultural Finance Review, Vol. 79 No. 2, pp. 204-216. https://doi.org/10.1108/AFR-05-2017-0034