Microfinance Horizon

Author(s):

Tanguy Bernard (International Food Policy Research Institute)
&
Stefan Dercon (University of Oxford)
&
Alemayehu Seyoum Taffesse (International Food Policy Research Institute)

Abstract:

Fatalism is considered pervasive, not least within many poor communities. In this paper, we explore whether ‘fatalistic’ beliefs have implications for the attitudes and behaviour of poor rural households towards investment in the future. We first explore the idea of fatalism, drawing inspiration from theories in psychology focusing on the role of locus of control and self-efficacy, and from the theoretical framework of aspiration failure as developed in recent economic literature. Using survey data from rural Ethiopia, we find evidence of fatalistic beliefs among a substantial group of rural households, as well as indicators consistent with a small aspiration gap and low self-efficacy. We also find that such beliefs consistently correlate with lower demand for credit, in terms of loan size, repayment horizon and productive purposes.

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