Credit program participation and child schooling in rural Malawi

Southeastern Africa

Malawi

Labour Market

Microcredit

Y Shimamura, S Lastarria-Cornhiel

2010

Shimamura, Yasuharu, and Susana Lastarria-Cornhiel. “Credit Program Participation and Child Schooling in Rural Malawi.” World Development 38.4 (2010): 567–580.
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Secondary Data: N. A.

2010

Malawi Rural Finance Company (MRFC)

August and September of 2006 (theoretical study + complementary interviews)

The main objective of the program is to offer credit to agriculture to smallholder farmers in Malawi. The main objective of the study is to evaluate the impact of the program on school attendance for children.

Smallholder farmers (no further details provided).

Malawi Rural Finance Company (MRFC) is the largest rural financial institution providing agricultural and business loans to smallholder farmers in Malawi and the only microfinance provider with national coverage. The identification of credit program impacts involves two types of selection biases: placement bias and self-selection bias. First, program placement was not random; program areas might be selected by MRFC on a profitability basis, and thus families in program villages, on average, might be wealthier than those in non-program villages. Such differences in the underlying village-level characteristics lead to an estimator with bias, called placement bias. Second, even within program areas, household decisions on participation in the credit program are non-random. Households with higher entrepreneurial capability, for example, are more likely to be a client of MRFC. To overcome these challenges, a combination of instrumental variables with a sampling survey design was adopted (see methodology below).

• School attendance
• Educational progression
• Household chores

Instrumental Variables and Sampling Survey Design

Study design: The authors employed a paired-site sampling survey design to make program placement in the sample a valid instrumental variable. Since credit use is extremely low in Malawi and widely scattered, the authors purposefully selected program sample rural sites in each of the three regions with high MRFC borrower levels to ensure a high proportion of households with borrowers. Second, nearby villages without access to formal credit (i.e., non-program villages) were also purposefully selected as control areas. Since the placement of the program has been determined by communications between MRFC field officers and village leaders, some villages close to the program villages do not have the program access due to insufficient communications and/or conflicts between MRFC field officers and village leaders. Third, a population census was carried out in each selected program and non-program village, and the list of households was drawn up. Finally, sampled households were randomly selected from the list and then interviewed.
Sample: The total number of sampled households is 498: 150 in the north, 198 in the central, and 150 in the southern regions.
Survey Instrument: the survey aimed to minimize differences in the underlying household- and village-level characteristics (both observable and unobservable) between the program and non-program communities so that program placement could be used as an instrumental variable. Since the survey was carried out during the school vacation break, school attendance was measured by the regular school attendance of the child at the end of the last academic semester.

In response to the agricultural credit program participation in Malawi, credit uptake decreased school attendance by young girl children. This finding raises concerns that young girl children are exploited as child labor, either at home or in the field, when working adults become more involved in income-generating activities financed by credit. The data, however, do not show clear evidence for young girls staying at home to do household chores or working in the fields in households that obtained credit, but instead find simultaneous occurrences between attending school and taking responsibility for domestic chores by young children. It would appear that credit uptake delays the realization of this concurrence among young girl children and leads to delayed school enrollment.

Child Labour

Households

Local

There is no clear evidence that the program increases household work or work in the fields for children in households that obtained credit. The study instead finds simultaneous occurrence between attending school and taking responsibilities for household chores by young children.

Credit uptake decreases the school attendance of young girls.

N. A.