California Center for Population Research

This study examines the relationship between microfinance programs and contraceptive use with data from the 1997 and 2000 waves of the Indonesia Family Life Survey. Community and individual fixed-effects models are used to control for nonrandom program placement and program participation selection bias. Given wide availability of contraceptive services at low costs in Indonesia, the hypothesized mechanism linking microfinance programs to contraceptive use is the desire to stop childbearing. I conclude that microfinance program availability is associated with increased contraceptive use, with a stronger effect at lower levels of community resources. The effect is also conditioned on desire for no more children. At the individual level, microfinance borrowing is not associated with increased contraceptive use at any level of household resources. Among women who report wanting no more children, microfinance borrowing is associated with lower odds of ever-use of contraception.