Household Allocation of Microfinance Loans in Kyrgyzstan

Type Working Paper
Title Household Allocation of Microfinance Loans in Kyrgyzstan
Publication (Day/Month/Year) 2015
URL Allocation of Microfinance Loans​in Kyrgyzstan-489.pdf
Within Kyrgyzstan, microfinance provides the largest source of credit for lowincome households. The allocation of these loans between current consumption and investment has a direct bearing on the impact these loans have on rural development. For investigating this allocation, a multivariate Probit model is developed and populated with borrowers’ loan allocations from 2006 to 2010. Key factors considered are education, gender, equipment ownership, and geographical region. Results indicate that the Naryn region has the largest impact on borrowers’ likelihood to allocate loans toward food and the smallest (negative) impact on the probability of starting a new business. Mobile phone and livestock ownership were identified as two key factors, which decreases borrowers’ probability of using loans to purchase food and increases the probability of agricultural investment or to start a business.

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