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Analysis of Poverty Reducing Effects of Microfinance from a Macro Perspective: Evidence from Cross-Country Data

Author

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  • Katsushi S. Imai

    (Economics, School of Social Sciences, University of Manchester (UK) and RIEB, Kobe University (Japan))

  • Raghav Gaiha

    (Massachusetts Institute of Technology (USA) and Faculty of Management Studies, University of Delhi (India))

  • Ganesh Thapa

    (International Fund for Agricultural Development, Italy)

  • Samuel Kobina Annim

    (Economics, School of Social Sciences, University of Manchester, UK)

Abstract

This paper tests the hypothesis that microfinance reduces poverty at macro level using the cross-country data in 2007. The results of econometric estimation for poverty head count ratio show, taking account of the endogeneity associated with loans from microfinance institutions (MFIs), that microfinance loans significantly reduce poverty. Thus, a country with higher MFI's gross loan portfolio tends to have lower poverty incidence after controlling the other factors influencing poverty. We also found that poverty reducing effect tends to be larger in Sub Saharan Africa (SSA) as suggested by the negative and significant coefficient estimate of the SSA dummy and gross loan portfolio. From a policy perspective, our results would justify increase in investment from development finance institutions and governments of developing countries into microfinance loans as a means of poverty reduction.

Suggested Citation

  • Katsushi S. Imai & Raghav Gaiha & Ganesh Thapa & Samuel Kobina Annim, 2010. "Analysis of Poverty Reducing Effects of Microfinance from a Macro Perspective: Evidence from Cross-Country Data," Discussion Paper Series DP2010-25, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2010-25
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2010-25.pdf
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    Citations

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    Cited by:

    1. Samreen FAROOQ & Prof. S.M. Jawed AKHTAR, 2024. "Microfinance and poverty reduction: an empirical evidence from SAARC nations," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(638), S), pages 179-186, Spring.
    2. Inoue, Takeshi & Hamori, Shigeyuki, 2011. "Financial permeation as a role of microfinance : has microfinance actually been helpful to the poor?," IDE Discussion Papers 299, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Esmeralda Doçi, 2016. "Microfinance and the Interaction of Macroeconomic Factors in Poverty Reduction," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 5, July.
    4. Takeshi Inoue & Shigeyuki Hamori, 2013. "Financial permeation as a role of microfinance: has microfinance actually been a viable financial intermediary for helping the poor?," Applied Financial Economics, Taylor & Francis Journals, vol. 23(20), pages 1567-1578, October.

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