Dynamic Interaction Between Microfinance and Household Well-Being: Evidence from the Microcredit Progressive Model for Sustainable Development

Ahmad Alqatan, Najoua Talbi, Hasan Behbehani, Samira Ben Belgacem, Muhammad Arslan () and Wafaa Sbeiti
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Ahmad Alqatan: Business Department, Arab Open University, Ardiya 92400, Kuwait
Najoua Talbi: Higher Institute of Finance and Taxation of Sousse, University of Sousse, Sousse 4002, Tunisia
Hasan Behbehani: Business Department, Arab Open University, Ardiya 92400, Kuwait
Samira Ben Belgacem: Department of Management Sciences, Faculty of Law, Economic and Management Sciences of Jandouba, BESTMOD-ISG, Jendouba 8189, Tunisia
Muhammad Arslan: Department of Accounting, Open Polytechnic—Te Pūkenga, Lower Hutt 5011, New Zealand
Wafaa Sbeiti: College of Business and Economics, American University of Kuwait, Safat 13034, Kuwait

Econometrics, 2025, vol. 13, issue 1, 1-20

Abstract: Microfinance aims to promote financial inclusion among underprivileged individuals, particularly through progressive microcredit, which enables borrowers to access increasing loan amounts over time. This study examines the conditions under which progressive microcredit positively impacts both small business performance and household well-being, considering borrower characteristics and business activity conditions. Using a dataset of 278 households across 110 administrative sectors in Tunisia from 2012 to 2020, this study employs two-stage least squares (2SLS) and three-stage least squares (3SLS) econometric techniques to estimate simultaneous equation models. The findings reveal that the cumulative amount of progressive microcredit received is mainly determined by project capital, suggesting that businesses with higher capital requirements tend to secure larger loans over successive cycles. Household well-being is significantly influenced by progressive microcredit, household income, net business benefit, rate of development index, and homeownership. Meanwhile, business profitability is driven by project capital and total fixed assets, highlighting the long-term impact of microcredit. The results highlight the critical role of microfinance in enabling small-scale entrepreneurs to expand their businesses while simultaneously improving household financial security. By promoting sustainable income generation, progressive microcredit serves as a key instrument in poverty alleviation and economic stability. This study underscores the necessity for microfinance institutions (MFIs) to tailor their lending strategies, ensuring optimal loan progression that balances business expansion with financial sustainability. Additionally, policymakers should refine microcredit frameworks to enhance accessibility and long-term economic benefits for low-income borrowers. Overall, these insights contribute to the broader discourse on financial inclusion and sustainable development, emphasizing that progressive microcredit not only facilitates entrepreneurship, but also serves as a driver of socioeconomic mobility.

Keywords: progressive microcredit; sustainable development small business; household welfare; net benefit; simultaneous equations (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2025
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