Microfinance and health: A study of selected countries

This research focuses on the contribution that access to credit via microfinance has on the health status of the poor. Using self-reported indicators of health status and an intertemporal unitary model, the study makes the case for considering credit as a determinant of individuals' health status. In the unitary model, household behavior is modeled as though resources allocation within the family does not affect individuals' preferences.; Firstly, the relationship between income and health is examined. Small loans from microfinance institutions are usually provided to the poor to help them start or expand income generating activities, which in turn can lead to improvements in nutrition, housing and sanitary conditions, resulting in improved health. In two of the three countries studied (Peru and Timor-Leste) the probit and OLS regressions suggest that income does contribute to a better health status as reflected in several health indicators.; Secondly, the effect of microfinance on multiple health indicators is tested by measuring the impact of access to credit on individuals' health. The results indicate that credit affects health positively only in Timor-Leste, but negatively in the other countries. The implications of this result are analyzed.; Finally, the impact that women borrowers have on the health status of their children is investigated. The literature suggests that microfinance increases the bargaining power of women and thus modifies their behavior and decision making in the household. The indicators used to measure children's health are child mortality, height-for-age scores, and weight-for-age scores. The results from the regression analysis indicate that women's access to credit is not statistically significant in determining children's health.