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Microfinance and Poverty Reduction:Evidence from a Longitudinal Household Panel Database

Mohammad Razzaque ()

Bangladesh Development Studies, 2010, vol. 33, issue 3, 47-68

Abstract: The effectiveness of microfinance in reducing poverty remains a subject matter of academic as well as policy interest. Assessment of microcredit interventions is often flawed by the shortcomings associated with the data and empirical methodologies employed that fail to tackle such issues as non-random participation and self selection of programme participants influenced by their unobserved characteristics. This paper makes an attempt to overcome these problems by making use of a unique longitudinal panel household database on Bangladesh. The empirical results seem to provide strong evidence of positive impact of microfinance as the cumulative household borrowing is found to be significantly and positively influencing household per capita income and asset-holding and inversely related to the probability of a household’s falling below the poverty line. The results imply that if all the eligible non-participant households are brought under micro finance, the poverty headcount ratio for this group would fall by seven percentage points. There is also the evidence of smaller microfinance institutions being more effective in anti-poverty programmes.

Keywords: Microfinance; Poverty Reduction; Household Panel Database (search for similar items in EconPapers)
JEL-codes: A10 (search for similar items in EconPapers)
Date: 2010
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