Impact of microfinance on the schooling of children

Abstract

The popularity of microfinance has surged over the last three decades. Microfinance helps transform lives of the poor with the provision of modest financial services like microcredit, savings, insurance, and money transfers, which would not have been possible via regular financial institutions as the poor lack collateral. However, research studies have shown mixed impacts of microfinance on the schooling of children. The authors of some studies even claim that microfinance programs might result in unintended consequences of adversely influencing children's schooling. The purpose of this study is to explore the impact of microfinance on the schooling of children. The sub-questions of this study are organized into three prongs: available studies on the topic, overall conclusion of the studies, and key themes that emerge from the findings. The unintended consequences framework is used to frame this study because of the lack of attention given to unintended consequences despite increasing attention and large investments in microfinance as a tool to help alleviate poverty. This study uses a meta-synthesis methodology to aggregate, analyze, and synthesize 32 research studies covering a total of 46 research sites. These studies focus on over 150 microfinance programs in 27 countries, and span across five different continents. Seventy six percent of the studies have shown that microfinance programs elicit either a mixed or a positive impact on the schooling of children, especially in terms of school enrollment and education expenditure. This study synthesizes a model to show the complexity of household's decision making in the form of children's schooling, and the interaction of key variables in influencing household's perception of the value of schooling.