THE IMPACT OF COMMUNITY SAVINGS AND INVESTMENT PROMOTION PROGRAM ON HOUSEHOLD INCOME AND CREDIT MARKET PARTICIPATION IN KASUNGU DISTRICT, CENTRAL MALAWI

This study analyses the impact of Community Savings and Investment Program (COMSIP) activities on household income and credit of member households of COMSIP groups in Kasungu District in Central Malawi. COMSIP groups are a form of village-based microcredit and community-based savings institutions with a number of socio-economic functions. The functions include mobilization of communities to save and/or invest their resources into income generating initiatives and provide credit. Using data from COMSIP Cooperative Union limited for Kasungu District in Malawi on income per capita and access to credit, this study tests the hypothesis that these variables were positively impacted on by membership to these COMSIP groups. The study uses Instrumental Variables (IV) methodology organized to reduce selection bias as well as endogeneity problems in the sample. The primary data on socio-economic and demographic variables was collected using household questionnaires, Key Informant Interviews and literature review as tools from a sample of 150 households. The study found that the variables such as sex of household head, age of household head, credit per capita, land per capita and distance of location of household to the COMSIP office, determine household decision to join COMSIP groups.Instrumental Variables analysis results show that the effect of COMSIP groups on household income and credit is very strong. The IV estimates indicate an increase of 88% income per capita and 96% increase in credit per capita of relatively poor participating households was significant at 5% and 1% levels of significance respectively. The findings also indicate that the simple targeting mechanism of COMSIP program based on householdviiland ownership is effective. Thus, the efficiency of the COMSIP program can be enhanced by allocating credit to households with marginal landholding, for which the impact is the greatest. Although microfinance programs, especially among the rural poor people living below the standard poverty line of one US dollar per day have elicited different reactions from different stakeholders, there seems to be a general agreement that the program is useful amongst the strategies for ensuring improved household income and credit of rural Malawians, hence reduced poverty in the long-run.