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Does Microfinance Reduce Poverty among the Poorest? A Macro Quantile Regression Approach

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  • Maricruz Lacalle†Calderon
  • Manuel Perez†Trujillo
  • Isabel Neira

Abstract

The goal of this paper is to provide empirical evidence to determine whether microfinance, measured through a country's gross loan portfolio per capita, has a heterogeneous effect on poverty reduction among countries with different levels of poverty. We have used a panel†data quantile regression with a data set for 57 countries for the years 2005, 2008, and 2011 to estimate the distributional impacts of microcredits on two poverty indices. Results reveal not only that microfinance significantly reduces the incidence and depth of poverty, but also that this effect differs across the different poverty levels (quantiles). The effect of microcredit on poverty reduction is slightly larger among countries where the incidence and depth of poverty are the highest, suggesting that microcredit reaches and benefits even the poorest individuals.

Suggested Citation

  • Maricruz Lacalle†Calderon & Manuel Perez†Trujillo & Isabel Neira, 2018. "Does Microfinance Reduce Poverty among the Poorest? A Macro Quantile Regression Approach," The Developing Economies, Institute of Developing Economies, vol. 56(1), pages 51-65, March.
    • Handle: RePEc:bla:deveco:v:56:y:2018:i:1:p:51-65
    DOI: 10.1111/deve.12159
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    2. Peterson K. Ozili, 2023. "The Future of Financial Inclusion," Advances in African Economic, Social and Political Development, in: David Mhlanga & Emmanuel Ndhlovu (ed.), Economic Inclusion in Post-Independence Africa, chapter 0, pages 167-177, Springer.
    3. Sèna Kimm Gnangnon, 2021. "Exchange rate pressure, fiscal redistribution and poverty in developing countries," Economic Change and Restructuring, Springer, vol. 54(4), pages 1173-1203, November.
    4. Sodokin, Koffi & Djafon, Joseph Kokouvi & Dandonougbo, Yevessé & Akakpo, Afi & Couchoro, Mawuli K. & Agbodji, Akoété Ega, 2023. "Technological change, completeness of financing microstructures, and impact on well-being and income inequality," Telecommunications Policy, Elsevier, vol. 47(6).
    5. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Poverty Reduction in Recipient-Countries," EconStor Preprints 213807, ZBW - Leibniz Information Centre for Economics.
    6. Sena Kimm Gnangnon, 2021. "Poverty volatility and poverty in developing countries," Economic Affairs, Wiley Blackwell, vol. 41(1), pages 84-95, February.
    7. Xiaohua Wang & Meilan Chen & Xi He & Fangfang Zhang, 2018. "Credit Constraint, Credit Adjustment, and Sustainable Growth of Farmers’ Income," Sustainability, MDPI, vol. 10(12), pages 1-15, November.
    8. Sena Kimm Gnangnon, 2021. "Economic complexity and poverty in developing countries," Economic Affairs, Wiley Blackwell, vol. 41(3), pages 416-429, October.
    9. Galina Besstremyannaya & Sergei Golovan, 2019. "Reconsideration of a simple approach to quantile regression for panel data: a comment on the Canay (2011) fixed effects estimator," Working Papers w0249, Center for Economic and Financial Research (CEFIR).
    10. Yogeeswari Subramaniam & Tajul Ariffin Masron & Mastura A. Wahab & Md Aslam Mia, 2021. "The impact of microfinance on poverty and income inequality in developing countries," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 35(1), pages 36-48, May.
    11. Galina Besstremyannaya & Sergei Golovan, 2019. "Reconsideration of a simple approach to quantile regression for panel data: a comment on the Canay (2011) fixed effects estimator," Working Papers w0249, New Economic School (NES).

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