Small loans help families beat seasonal hunger, boost farm output, Yale study finds

Small, carefully timed loans can reduce seasonal hunger and increase agricultural production among poor rural families, according to research building on nearly two decades of work that began in Bangladesh’s monga-affected north.

The latest study, conducted in Nepal by Yale economist Ahmed Mushfiq Mobarak and fellow researchers Corey Vernot and Arjun Kharel, found that providing migrant families with $90 loans during the agricultural lean season improved food security and increased rice production by 12%.

The findings, published by Yale School of Management this week, build on earlier experiments by Mobarak and other researchers in Lalmonirhat and Kurigram, where poor households were given small grants or loans to cover the cost of temporarily migrating to cities for work. 

That intervention increased migration and significantly improved food consumption among families remaining in the villages.

The research points to a specific problem in seasonal poverty: households can have future income or access to employment elsewhere but lack cash when food and work are scarce.

From monga to migration

Seasonal hunger has historically been particularly severe in northern Bangladesh between rice planting and harvesting, when demand for agricultural labour falls.

Yale said that during the 2015-16 lean season, more than 60% of landless households surveyed in northern Bangladesh reported sometimes reducing the number or size of meals, while 20% did so regularly. 

Mobarak and his colleagues tested whether helping workers temporarily migrate could reduce that pressure.

During the 2008 rice-growing season, researchers worked with 1,900 households across 100 villages in Lalmonirhat and Kurigram.

Selected households were offered small cash grants or loans to cover the costs of travelling to urban areas for temporary employment.

Migration increased from 34% among households in the control group to 57% among those offered cash or credit incentives. 

The impact was also visible in household consumption. According to Yale’s latest account of the research, family members in households that sent a migrant worker consumed about 600 additional calories per person per day during the lean season. 

The effect continued after the initial experiment.

A year later, 47% of households previously offered an incentive migrated again without receiving another incentive, compared with 35% of the control group. 

The programme was later expanded through partnerships involving RDRS, Innovations for Poverty Action and Evidence Action. Yale says more than 200,000 migration loans were provided in Bangladesh in 2021.

“The policy responses to seasonal poverty may be different from the responses to chronic poverty,” Mobarak told Yale Insights. 

$90 loans raise rice harvest by 12%

The researchers later examined a different version of the problem in Nepal, where seasonal migration to neighbouring India is already common.

They found that workers could travel to India for employment but often had difficulty sending money home while they were away.

Without convenient cross-border electronic transfers, many migrants brought their earnings back when they returned for the harvest. Their families, however, needed money during the preceding lean season.

Researchers therefore provided households with $90 loans, repayable when migrant workers returned.

The loans improved food security, with particularly significant benefits for women who remained at home while male family members migrated, according to Yale. 

Households also used part of the money for agricultural production.

Those receiving loans increased spending on nitrogen fertiliser by 17% and spent an additional 3.4 to 3.6 hours per weekworking on their farms.

Rice production consequently increased by 12%.

Migrants whose families received loans also saved more while away, helping households repay the borrowing after they returned.

The researchers said the results show that access to money at the right point in the agricultural cycle can matter even when households already have income coming later.

Mobarak said digital payment systems such as Bangladesh’s bKash have reduced similar domestic remittance problems, although moving money across international borders remains more difficult because of regulatory restrictions.

The findings suggest that where cross-border digital transfers are unavailable, short-term credit timed around migration and harvest cycles could provide an alternative for families facing seasonal shortages.

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