Access to Credits and Erosive or Non-erosive Coping Strategies: An Empirical Analysis in Bangladesh
Keywords:Access to Credits, Coping Strategies, Erosive Coping, Income Shock, Microfinance, Natural Disaster
This paper uses household-level data from a nationally representative survey conducted in 2009 and 2010 in Bangladesh to determine the relationship between coping mechanisms and having access to credits. The analysis finds that more than half of the sample claimed to have faced shocks over the years. The paper also discusses the coping strategies households undertake after experiencing economic shocks. As Bangladesh is prone to natural disasters, some climatic shocks are annual in certain parts of the country. A lot of factors influence the coping strategies taken by the households. Poorer households are more likely to use coping mechanisms that may have negative implications in the long run as they include the depletion of capitals, assets, savings etc. An econometric model is used to address what might help them to cope better and whether having access to any kind of credit can help them cope, i.e., help them to take non-erosive measures when they face shocks. Policy implications include the importance of developing government programs, safety net programs and developing the networks of microfinance organizations.