Journal of International Development Studies
Online ISSN : 2434-5296
Print ISSN : 1342-3045
Micro Credit and Rural Household Labor Allocation for Non-Farm Sector: A case study of Nepal
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2019 Volume 28 Issue 1 Pages 85-102


This paper aims to empirically assess whether Micro Credit (MC) program has impact on rural poverty alleviation, and on the change of household's labor allocation from agriculture sector to non-agriculture sector. Previous studies have provided evidence that economic development was accompanied by the expansion of non-agriculture sector into which the labor allocation of rural household shifted from agriculture. On the other hand, with the recent remarkable growth of MC program, there is a significant number of researches on effectiveness of MC for poverty alleviation, whereas there is a limited number of empirical evidences which assess the effectiveness of MC in relation to the shift of household's labor allocation.

This paper examined the case of the Nepal Poverty Alleviation Fund program, and applied quasi-experimental method by eliminating “endogenous bias” problems. The results indicated that MC program was effective in poverty alleviation and had impact on household's labor allocation by shifting from agriculture to non-agriculture sector. Also, there was a difference in the change of labor allocation by gender. Men in beneficiary households were more likely to shift to non-agriculture sector than women.

This paper also suggests that MC program would be effective if it could consider other types of interventions to support rural women in Nepal who play a major role in agriculture sector from the perspective of “Feminization of Agriculture”.

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© 2019 The Japan Society for International Development
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