Rural Classes and Credit Participation: The Itasy Livelihood Classes (Madagascar) Between Risk-aversion and Debt Capacity

While technical and economic factors are traditionally advanced to explain the failures of microfinance, a growing literature explores how moral factors and socioeconomic norms help to shape financial behaviors. In order to examine this issue in more depth, we conducted an empirical analysis of the links between socioeconomic stratification and financial behaviors. This original perspective enriches the literature on financial inclusion in the under-explored Malagasy context. Using data from the 2008 Itasy Observatory survey, we conducted a cluster analysis to identify five classes of rural households, ranging from a very poor and insecure group to an upper group of educated farming and non-farming households. Using a multinomial treatment-effects model, we established distinct 'class-based' credit behaviors showing that financial needs vary according to the users' socioeconomic profile. What is more, such financial behaviours can be explained by taking social factors into account in addition to economic ones.