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No. 362

January 2011

Vol. XIC

ISSN 0019-5170


Microfinance, Rural Employment and Poverty Reduction in Nigeria: Promoting Sustainable Access to Credit for Rural Enterprises

Elijah Udoh and Elias A. Udeaja

Poverty is associated with lack of material assets. In Nigeria, it is predominantly rural manifesting itself in form of limited access to productive resources and opportunities that can enable the poor to generate income and wealth. Hence, provision of financial resources to the rural poor with skills is believed to enable them liversifv their livelihood activities into microenterprises for additional income generation. The paper assesses, both theoretically and empirically, the relationship between credit to rural enterprises and rural employment generation in Nigeria. Using ordinary least squares method the study finds that increasing microcredit to agriculture, the main source in employment in the rural area is capable of reducing unemployment thus creating income and wealth for the rural poor. The implication of this finding is that eliminating impediments to effective microfinancial intermediation in the rural areas would encourage microenterprises. increase employment and alleviate poverty in the rural communities. For sustainable micro financial intervention in the rural area, the paper recommends that micro financial institutions should be efficiently managed as a bussiness and not a charitable organization.It must mobilize its, own resources, apply appropriate lending technology, provide attractive loan products, have their loan repaid,manage risks, make profit, finance the growth of outreach from savings and profits, and through advocacy, strive for a conducive policy and legal environment.

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Is Inflation Accounting in India Anti-Poor? Group-wise and Commodity wise Analysis of Recent Inflation Data of India

P. K. Baby and K. R. Nisha

Majority of existing literature ascertain the association between rising inflation and falling well being of the poor. This paper reinvestigates such a relation using recent inflation data of India.Despite all its estimation errors, shooting inflation and prices made the life of poor much worse compared to rich for last few years in the country.Inflation is measured based on the consumption of basket of goods and ability to hedge asset of the people across the income level.The recent WP1 based inflation data of India recorded a steep fall, however, the benefits of lowering inflation has not transferred to the poor.This paper examines the causes of such phenomenon taking both WPI based and CPI based inflation data.Based on the sector-wise and commodity-wise analysis it is observed that in India, inflation estimation is over weighted by the oil and manufacturing group.Food inflation still remains as a major issue contributing to the incidence of poverty of the poor even at the lowest inflation in the country.

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The Effects of International Remittance Income on Child Education and Child Labour : Evidence from Nepal

Michael A. Milligan and Alok K. Bohara

Remittance income is an important source of funds for many households in the developing world. We analyze how remittance income from international sources contributes to child welfare by comparing the effects of household remittance income and non-remittance income on child educational attainment and child labour in Nepal. We find that remittance income contributes positively and significantly to child welfare, but significantly less so than the same amount of income from other sources. We also discuss welfare effects of other socioeconomic variables, such as the child's gender and caste.

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Farmers' Suicides in Punjab : A Discriminant Analysis Approach

Prabhjeet Kaur, H. S. Dhaliwal and Sukhpal Singh

Over capitalization and under utilization of capital assets in Punjab agriculture has hardly hit the net returns of farmers especially of small and marginal ones. Consequently, these economic factors shove some of the farmers towards the extreme step of suicide. But on the other hand, there are farmers who are struggling and still surviving with the similar nature of agriculture. In this context, the present study is planned to study the contribution of some important factors in discriminating the distress levels of the two groups of population, namely, population with suicide victim cases and the population without suicide victim cases. The discriminatory analysis revealed that income from crops, income from the dairying and total loan outstanding are the main factors which are discriminating the two groups of population. The study concludes that there is a strong need to increase the net returns from crop and dairying.Moreover, the problem of loan outstanding should also be addressed. This will help in reducing the farmer's distress by improving their economic lot.

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Micro Finance and Economic Empowerment: Emerging Issues

Sikta Pati and Sudhakar Panda

Micro credit refers to small loans made available to the poorer households to enable them to start some type of income generating business. This type of a loan transaction is not related to borrower mortgaging either his land or any other asset which he/she may not have. It is based on trust and not on any complicated legal procedures. Prof. Yunus, the pioneer in the field proved that provision of micro credit to poor women in Bangladesh worked well and helped them to get out of poverty. It gave them a sense of material well-being as well as a sense of dignity and empowerment. Of late a debate has been raised relating to commercialization of micro credit. This shift in thinking sounds more consistent with the philosophy of laissez-faire and fits into the spirit of globalization of money and capital. The perceived advantages of commercial micro credit may be weighted against the socially motivated financial support given to the poor rural and enterprising households to promote equity and inclusive growth.

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The Study of Trade-Poverty Nexus in Pakistan : Under Investigation of Pro-Poor Trade Index (PPTI)

Khalid Zaman, Mehboob Ahmad and Waseem Ikram

Pakistan's trade suffers seriously due to various structural issues which need to be addressed. Effective and sound trade policy plays an important role in alleviating poverty nationwide. Pro-Poor Trade Index (PPTI) deals with the dynamic aspect of trade-poverty-inequality. The aim of this study is to investigate the potential impact of trade policy on the poor in Pakistan. Data is analyzed from 1985-2006. This research is extended within the phenomena of Pro-poor Growth Index (PPGI) as proposed by Kakwani & Pernia (2000).

Results reveal that during the last two decades, three phases are regarded as Pro-poor.First phase is from 1985-86, second phase is from 1990-91 and the third phase is from 1997-99. While remaining period is pro-rich or anti-poor. Cumulative effect of two decades is Pro-poor nation wide at rural level,whereas it is antipoor at urban level. This analysis helps decision makers in developing strategies and policies for enhancing trade thereby alleviating poverty.

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Comparative Study of Use of Technology by Banks in India

Shraddha Banga

Developing economies explore new resources constantly for their economic development and money has a big role in transforming these efforts into positive results. Banks have a major role in increasing the supply of money by rapidly increasing the pace of transfer of money, which leads to increase in the velocity of money. The latest technologies in banking sector have nearly omitted the time lag in making monetary transactions. The banks are making use of Electronic Fund Transfer (EFT) facility to enhance the velocity of money. However, there exists disparity in performance of different categories of banks in context of electronic funds transfer (EFT) which this paper proposes to study.

Study of performance of different categories of financial institutions is made in terms of both volume and value of EFT facility being promoted by them. The conclusion is based on comparative analysis of both these studies.

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Globalization and Stability in Economic Development : Experience of Developing Countries

Manjit Singh and P.S. Raikhy

The paper attempts to examine the stability in economic growth of developing countries in context of globalization. The data were collected at four points of time, from World Bank Publications for 66 developing countries. Tabular analysis, correlation analysis, rank correlation analysis, Chow test etc. were used to analyze the data. The empirical results showed that stability in growth rates of developing countries improved during the period of globalization showing that globalization has led to stability in economic growth of developing countries. The results of Chow Test confirmed the stability in regression parameters during the period of globalization. The results also showed that stability was more in fast growing countries as compared to slow growing countries.

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A Monetary Multi-Regional Economic Growth Model with the CIA Approach

Wei-Bin Zhang

This paper proposes a monetary growth model of a multi-regional economy with the money-in-advance (CIA) approach. The national economy consists of multiple regions and each region has one production sector. The production side is the same as in the neoclassical growth theory. Households move freely between the regions equalizing utility level between regions by choosing real money, consumption, housing and saving. We examine effects of changes in the inflation policy, and the CIA parameter On the long-term economic growth and geography, simulating a three-region economy. We get some insights into the role of money on regional economic growth. For instance, as far as national capital stock is concerned our model predicts the same effect as the Tobin model does. As our model is multi-regional, it can explain many phenomena that the traditional approaches in monetary growth theory fail to do. Although a rise in the inflation rate increases the rate of interest, the real money, the total output, and total saving, the effects on different regions are different. This is specially reflected in housing markets. As some people migrate from the advanced region to the other two regions, the lot size in the technologically most advanced region is increased and environment is improved. Moreover, the technologically less advanced region's growth rates of the population, wealth, consumption and land rent are highest.

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Relationship between Budget Deficit and Interest Rate in the Economy of Pakistan : An Econometric Study

Chandan Kumar Mukhopadhyay, Debabrata Mitra, and Kanchan Datta

There has been a plethora of studies concerning the relationship between budget deficit and interest rate. An expansionary, fiscal policy followed by the Government to finance the deficit leads to a shift of the IS curve to the right, resulting in an increase in interest rate. On the other hand, Ricardian Equivalence Theorem negates any such relation. This study involves IPS data, where the real interest rate is used. This study is based on a battery of tests like. ADF, PP unit root test. Correlogram followed by the estimation of Co-integration. Vector ECM, Granger Causality. This stud rejects the Ricardian Equivalence Theorem and finds that there exists a long run as well as short run dynamics in the relationship where unidirectional Granger Causality runs from Interest Rate to Budget Deficit over the period 1960-1986 in the economy of PAKISTAN. This result implies that the high interest rate fuelled the accumulation of more debt through increase in interest payments and the consequent debt-deficit spiral.

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Gender Differentials in Professional Education, Employment and Women Empowerment A Study with Reference to Rural Urban Divide

Ritisnigdha Panigrahi

The study focuses on educational deprivation of women and disempovverment. Gender and regional inequalities in professional education have been analyzed from the viewpoint of empowerment. Excess to education is directly related to employment and, hence, gender differences in labour participation are also analyzed. Empirical vesAite shew thav gender differentiations in higher professional education are highly marked. But differences are continuously reduced by more rapid growth of girls than boy's education. Labour force participation rate by different educational streams are highly marked, but these are also reduced. However, urban rural divide seems to be widening. An interesting finding of this study is that both male and female labour participation rate in rural and urban regions have been declining fast due to greater demand for higher professional education. Rural urban migration is also affecting these inequalities.

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Export Performance of coffee in india

Nidhi Sharma

The coffee industry rests upon the production of a global commodity that has grown two-fold in volume and 3.5 times in value since the 1960s, generating in the process billions of annual export dollars.More than one half of world's coffee is produced on small holdings of less than 5 hectares. Anticipated higher production in Brazil during the crop year 2008-09 may drag down the coffee prices in the shorter term in all exporting markets including India. Meanwhile, in exporting countries,prices of agricultural inputs continue to soar and labour recruitment becomes increasingly scarce and costly. Record production in Asia, the new powerhouse supplier of cheap coffee deepened the crisis. Vietnam, which produced almost no coffee in the early-1990s, has achieved the position of third largest producer in the world with about 12 percent of the world market.Asian over production has led to a fall in quality as well as serious price lumps. Lower quality translates into lower prices, a cycle which, without acess to credit can take farm economies and family budgets in the same direction.The production glut of the last few years has had devastating social consequences for millions of coffee growers, the downstream businesses dependent upon these producers and coffee exporters. Besides, price volatility and overproduction aside, certain characteristic specific to the coffee industry also play an important role in shaping its market. On the consumer (demand) side, the market is highly price-inelastic due to coffees addictive nature and the more intangible mix of prestige and exoticness currently associated with specialty coffee.

On the production (supply) side, coffee displays short-run price-elasticity and long term price-inelasticity. During the past couple of years, the price of coffee for the end consumer has not decreased,even though world supply has been plagued with over-production and low-prices paid to growers. Quantities with respect to values of exports of coffee are fluctuating over the study period. India seems to have become a residual rather than a steady and regular exporter. There are fluctuations in the export quantity of coffee exports while export value has a rising trend till 1999 and after 1999 export value of coffee is declining and again rising in 2005-06. Exports of coffee increased from 85.69 thousand tons in 1990-91 to 177.89 thousand tons in 2005-06. Present paper attempts to study the export competitiveness of coffee. Analysis has been done with the help of annual time series data covering time period between 1990-91 and 2005-06 with the help of Nominal Protection Coefficient (NPC) and Co-integration techniques.

The values for study period reveal that coffee has been a highly export competitive commodity in India with average NPC around .27, far below unity except for year 1992. Shares of countries like Germany, USA, Poland and Japan in coffee exports are falling continously while export share of Russia, Italy, Spain and other non traditional small countries has risen dramatically with certain fluctuations. Therefore, there is no evidence of co-integration between Dpt and Ipt. It implies that prices of coffee donot tend to move uniformly across spatial markets (Indian Domestic and Export markets), innovative market initiatives linked to social equity and ecological or conservation concerns have the potential to lift producers out of the devatation caused by low prices. Government and private sector actors also have a role to play in solving the crisis.

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