Impact of Microcredit Program on Rural Out-Migration for Employment: Evidence from Village Revolving Fund Program in Kanchanaburi Province, Thailand

Abstract

The government of Thailand has introduced the innovative microcredit scheme, the Village Revolving Fund program (VRF) since 2001, aiming to uplift living conditions of the poor. Using data from the 2003 and 2004 rounds of Kanchanaburi Demographic Surveillance System (KDSS),
this study aims to explore the impact of this microcredit scheme on rural out-migration for employment. A multilevel model is used to elicit this impact by controlling for characteristics of individual, household,
and community. Important findings from multilevel models indicate that amount of money households borrowed from the Village Revolving Fund program is statistically significant in reducing the probability of rural
out-migration for employment (-.00010, p<.001) when other relevant factors from individual and household levels as well as village related characteristics are controlled. For a given loan of 20,000 Baht from the Village Revolving Fund program (VRF), the probability of individual rural out-migration for employment is reduced by 2 percent higher than non-borrowing households. This suggests that increasing loan from the Village Revolving Fund program to households resulted in decreasing probability of rural out-migration for employment. Use of loan from this program for agricultural activities can significantly reduce rural out-migration for employment among the poor households.