Microfinance and Poverty -A Macro Perspective

Katsushi Imai, Ganesh Thapa and Samuel Annim
Additional contact information
Ganesh Thapa: International Fund for Agricultural Development, Italy

No DP2010-30, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper tests the hypothesis that microfinance reduces poverty at macro level using cross-country and panel data, based on the Microfinance Information Exchange (MIX) data on MFIs and the new World Bank poverty estimates. Taking account of the endogeneity associated with loans from MFIs, our econometric analysis shows that a country with higher MFIs' gross loan portfolio tends to have lower levels of FGT class of poverty indices. Contrary to recent micro evidence based on randomised evaluations pointing to no or weak effect on poverty, there is robust confirmation of the poverty reducing role of microfinance. Significantly, microfinance loans are negatively associated with not only the poverty headcount ratio, but also with the poverty gap and squared poverty gap, implying that even the poorest benefit from them. The case for channelling funds from development finance institutions and governments of developing countries into MFIs is thus reinforced. Our assessment has added significance as the tide seems to be turning against microfinance as a means of poverty alleviation.

Pages: 45 pages
Date: 2010-10
New Economics Papers: this item is included in nep-dev and nep-mfd
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Citations: View citations in EconPapers (3)

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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2010-30.pdf First version, 2010 (application/pdf)

Related works:
Journal Article: Microfinance and Poverty—A Macro Perspective (2012)
Working Paper: Microfinance and Poverty -A Macro Perspective (2010)
Working Paper: Microfinance and Poverty A Macro Perspective (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:dp2010-30

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