Effects of Agricultural Credit and Microfinance on Expenditure Patterns in Yemen
Poverty is a core problem in the Yemeni economy. About 47 percent of the total population lives below the poverty level. Moreover, the rapidly increasing population causes competition at meeting basic needs. From the macro economic point of view, Yemen also experiences unemployment problem and ot...
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| Format: | Thesis |
| Language: | English |
| Published: |
2004
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/6130/1/FP_2004_15.pdf |
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| Summary: | Poverty is a core problem in the Yemeni economy. About 47 percent of the total
population lives below the poverty level. Moreover, the rapidly increasing
population causes competition at meeting basic needs. From the macro economic
point of view, Yemen also experiences unemployment problem and other socially
adverse phenomena that contribute to low GDP. The economy of Yemen is vitally
dependent on the growth of the rural economy, too. The majority of the people live
in the rural areas. Due to the fact and the present socio-economic structure, the
national and economic development of Yemen has been adversely affected. In order
to meet the poverty crisis, the government of Yemen reformed its economic policy
and undertook a small-scale credit program. Under this reformation, the National
Agricultural Bank of Yemen has introduced agricultural credit and microfinance
programs in mid 1980's and 1990's respectively. At present, the programs have
progressed and could be evaluated for its success towards the aim of reducing
poverty.
The present study attempts to evaluate the effectiveness of introducing small-scale
credit towards better livelihood of the beneficiaries. Using econometric modeling,
the study focused on the living standard of the beneficiaries. To examine the
effectiveness accurately, a non-beneficiary group was also studied. By comparing
two groups of respondents namely, "with credit" and "without credit", the study
attempted to portray the effectiveness of the program. The sample size in this study
was 540. A total of seven governances were selected for data collection. Simple
random sampling procedure was used to select the respondents from the sampling
frame. The study used Extended Linear Expenditure System (ELES) to estimate the
poverty line and the living standard based on the socio-economic attributes of the
respondents. In ELES, a demand system for food and non-food items was used.
The impact of credit was measured by incorporating a dummy variable representing
the 'with-without' group into the model.
The study extended its investigation hrther by carrying out a logistic regression
analysis to determine the borrowers' preference between the two programs based on
the socio-economic attributes. The dependent variable of the model was
dichotomous namely, microfinance or otherwise. 'Otherwise' includes the
respondents who preferred agricultural credit.
The results showed that there was a significant effect of socio economic variables
and other factors on the expenditure of different food and non-food items.
Education and family size showed significant contribution to the total expenditure.
Dummy 'with-without' credit was found significant, too. This indicated that there
was a significant effect of small-scale credit program on the demand of food and
non-food items. The standard of living of 'with-credit' group was found higher than
that of 'without-credit' group. Logistic regression analysis showed that the
respondents preferred microfinance. Income, education and family size were found
to significantly determine the preferences for credit.
Based on the findings of the study, it is recommended that further extension of credit
programs to the other poor governances of Yemen would be able to enhance
the socio economic status of the people. Input supports, low interest rate,
reformation of repayment structure are required to be reviewed for further
development of policy. |
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