 The Income Augmenting and Budget Tightening Impacts of Microfinance: Theory and Evidence from PakistanWajid Khan, Ikram Ullah and Sun Shaorong SAGE Open, 2024, vol. 14, issue 3, 21582440241267368 Abstract: Since the institutionalization of microcredit as the flagship poverty alleviation program, its potential has been under constant scrutiny by practitioners and researchers. This article extends previous work by analyzing two issues: (a) whether microcredit has the potential to alleviate poverty and (b) whether the conclusion drawn from the first issue is sensitive to interest rate variations. We first theoretically show that there is reason to believe that microcredit has the potential to change the fortunes of poor communities. However, the direction of the change in fortunes is uncertain and depends on how costly microfinance institutions’ financial services are perceived by the poor. We then test these theoretical assertions against data collected from 568 individuals from Northern Pakistan. By comparing various sub-groups using Ordinary Least Square and Binary Logistic regression analysis, our results reveal that higher interest rates more than offset the positive effects of microcredit on clients’ income. We also discuss policy implications of the findings. JEL Classification : I30, G21, C61, E64. Keywords: poverty; microfinance institutions; optimization; income/price policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:14:y:2024:i:3:p:21582440241267368 DOI: 10.1177/21582440241267368 Access Statistics for this article More articles in SAGE Open |
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