Risk Management among the Poor:The Case of Microfi nancial Services

This paper argues that the level of financial services provision determines the riskmanagement strategies among the poor. The paper estimates the determinants of thehousehold’s use of one, two or all three types of microfinancial services applying orderedprobit models and additionally probit models for combinations of them. By doing this onhousehold survey data from Sri Lanka, there is empirical evidence that household’sprobability to participate in microfinancial services increases with rising self perceptiontowards risk. Further, we find that it depends highly on the type of risk, if a household is moreor less likely to use microfinancial services in Sri Lanka, whereas the accessibility to one, twoor three microfinancial services is determined by the experience of specific hazards in thepast. The study finds that the poor are less likely to use microfinancial services than theirbetter off counterparts....