Measuring the Impact of Microfinance on Child Health Outcomes in Indonesia

This paper uses data from the Indonesian Family Life Survey (1993-2000) to investigate whether access to MFIs affects child health outcomes. It estimates a difference-in-differences model to test whether a change in MFI availability at the community level affects the average weight gain of children. The study found that for children in communities that initially lacked access to MFIs, a one percent increase in initial weight decreased child growth rate by 0.70%, whereas for children with access a one percent increase in initial weight decreased growth rates of children by 0.54%. Findings include:

• Children in communities without access grew faster than their counterparts, who started off weighing more;
• Living in communities that experienced higher growth rates and higher levels of wealth significantly increased childrens weight gain;
• In communities that initially lacked MFI access, children in segments that gained MFI access grew significantly faster than those in segments that did not.

Availability of credit in the wake of income shocks helps households smooth consumption, lessening any negative effects on child health. The results reinforce the importance of access to credit as a crucial policy tool in developing countries.