Analysis of the Effect of Microcredit on Rural Sustainable Development Components: Application of Propensity Score Regression Approach and Bootstrap Algorithm

Abstract

Sustainable development is now considered in many developing countries as the main economic approach for reducing poverty and improving living standards and enhancing environmental protection. Therefore, the use of appropriate tools to achieve the goals of sustainable development in rural areas has been very important. In this regard, the microcredits has been proposed as an effective tool in sustainable rural development. So the purpose of this study is to answer the question of what will be the impact of microcredit on the economic, social and environmental sustainability of rural households? In order to answer this question, 309 questionnaires were completed from the households of the villages of Torbat-e-Jameh County and the combination of propensity score matching regression approach and bootstrap algorithm was used. The results showed that the microcredit has a positive effect on economic and social indices, however, its impact on the environmental index is negative. In order to increase the validity of results the confidence interval was estimated. Furthermore, the Rosenbaum sensitivity analysis revealed that the sensitivity of the results of economic and social indices, even with a fourfold increase in gamma, is still significant. Also, the probability of a difference in the treatment group due to unobserved factors (or gamma) should be increased to 3.2 to change the effect of microcredit on the environmental index. Given the importance of microcredit at the rural communities due to the process of economic and social development, and also, its impact on the reducing of negative effects on the living environment, it is recommended that the government should support microfinance institutions and provide a legal and environmentally friendly framework to expand microcredits.