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The effect of microfinance on income inequality: Perspective of developing countries

Author

Listed:
  • Ali Israa Ali Mahmoud

    (Department of Economics, Faculty of Management Technology, German University in Cairo, Cairo, Egypt)

  • Ghoneim Hebatallah

    (Department of Economics, Faculty of Management Technology, German University in Cairo, Cairo, Egypt)

Abstract

Aim/purpose – Studying the impact of microfinance on income inequality from a macro- -economic perspective. Design/methodology/approach – Cross-sectional regression analysis is used to measure the effect of microfinance on the Gini index in a sample of 30 developing countries from across Africa, Asia, Latin America, and Europe. A set of control variables are added to the model including: inflation, educational attainment, democracy, population growth, percentage of arable land to strengthen the model’s reliability. Findings – Results indicate that neither a positive nor a negative impact of microfinance on Gini index could be significantly proved for the sample countries. Research implications/limitations – Due to lack of data availability, research is conducted on a small sample of 30 countries. Therefore, to obtain more generalisable results, it is recommended for future research to use a larger sample. Originality/value/contribution – Microfinance is becoming a focal issue in alleviating poverty and inequality, and this paper’s main contribution is that it explores this matter from a macro-economic perspective by looking at the holistic impact of microcredit on a sample of developing countries. Hence, the paper provides further investigation and suggestions for a better implementation of microfinance policies.

Suggested Citation

  • Ali Israa Ali Mahmoud & Ghoneim Hebatallah, 2019. "The effect of microfinance on income inequality: Perspective of developing countries," Journal of Economics and Management, Sciendo, vol. 35(1), pages 40-62, March.
    • Handle: RePEc:vrs:jecman:v:35:y:2019:i:1:p:40-62:n:5
    DOI: 10.22367/jem.2019.35.03
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    References listed on IDEAS

    as
    1. Mohamed Ariff & Munawar Iqbal, 2011. "Introduction to Islamic Financial Institutions," Chapters, in: Mohamed Ariff & Munawar Iqbal (ed.), The Foundations of Islamic Banking, chapter 1, Edward Elgar Publishing.
    2. Craig P. Aubuchon & Rajdeep Sengupta, 2008. "The microfinance revolution: an overview," Review, Federal Reserve Bank of St. Louis, vol. 90(Jan), pages 9-30.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. 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).

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    More about this item

    Keywords

    developing countries; income inequality; microcredit; microfinance;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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