The Role Of Microfinance In Poverty Reduction: Countries Experiences by Regions 2000-2018
Article Sidebar
-
Poverty, Microfinance, Financial Sector, Employment, Egypt
Abstract
The purpose of this study is to evaluate the impact of microfinance provisions on poverty reduction across various developing and a few developed countries, examining how regional differences and time influence the performance of the microfinance industry. The study employs a panel data model and pooled Ordinary Least Squares (OLS) to analyze the effect of key microfinance indicators—namely, the number of microfinance institutions, gross loan portfolio, and microfinance intensity (gross loan as a percentage of GDP)—in conjunction with control variables such as inflation, employment, population growth, trade openness, and the contributions of agriculture and industry to GDP. The empirical analysis is conducted using panel data from 91 countries across six regions, covering the period from 2000 to 2018, with data sourced from the World Development Indicators and the Microfinance Information Exchange (MIX) Market. The findings of the study indicate that microfinance indicators significantly reduce poverty, highlighting the critical role of microfinance in improving the living standards of disadvantaged populations. Additionally, the study finds that certain control variables also contribute to poverty reduction, further supporting the efficacy of targeted economic policies. This study underscores the importance of microfinance as a tool for poverty alleviation, particularly in regions with high poverty rates and low financial inclusion. The research also suggests that enhancing the performance of the microfinance sector can aid governments in achieving their poverty reduction goals. The implications of this study are significant for policymakers and stakeholders in the microfinance industry. It calls for the development of regulatory frameworks, legislative reforms, and policies aimed at strengthening the microfinance sector. Moreover, the study highlights the need for continuous training, capacity building, and support to ensure the sustainability and effectiveness of microfinance initiatives.
Full text article
References
Aggarwal, S., Klapper, L., & Singer, D. (2013). Financing businesses in Africa: The role of microfinance. In Microfinance in Developing Countries (pp. 178-198). Springer. https://doi.org/10.1057/9781137301925_9
Ahlin, C., & Jiang, N. (2008). Can micro-credit bring development? Journal of Development Economics, 86(1), 1-21. https://doi.org/10.1016/j.jdeveco.2007.08.002
Barometer, M. (2019). Convergence (10th ed.).
Battilana, J., & Dorado, S. (2010). Building sustainable hybrid organizations: The case of commercial microfinance organizations. Academy of Management Journal, 53(6), 1419-1440. https://doi.org/10.5465/amj.2010.57318391
Bauchet, J., & Morduch, J. (2013). Is micro too small? Microcredit vs. SME finance. World Development, 43(1), 288-297. https://doi.org/10.1016/j.worlddev.2012.10.008
Beegle, K., & Christiaensen, L. (2019). Accelerating poverty reduction in Africa. World Bank Publications. https://doi.org/10.1596/978-1-4648-1232-3
Bendig, M., Unterberg, M., & Sarpong, B. (2014). Overview of the microcredit sector in the European Union 2012-2013. European Microfinance Network.
Berhane, G., & Gardebroek, C. (2011). Does microfinance reduce rural poverty? Evidence based on household panel data from northern Ethiopia. American Journal of Agricultural Economics, 93(1), 43-55. https://doi.org/10.1093/ajae/aaq126
Boonperm, J., Haughton, J., & Khandker, S. R. (2009). Does the village fund matter in Thailand? World Bank Policy Research Working Paper (5011). https://doi.org/10.1596/1813-9450-5011
Boonperm, J., Haughton, J., & Khandker, S. R. (2013). Does the Village Fund matter in Thailand? Evaluating the impact on incomes and spending. Journal of Asian Economics, 25, 3-16. https://doi.org/10.1016/j.asieco.2013.01.001
Inoue, T., & Hamori, S. (2013). Financial permeation as a role of microfinance: Has microfinance actually been a viable financial intermediary for helping the poor? Applied Financial Economics, 23(20), 1567-1578. https://doi.org/10.1080/09603107.2013.839859
Khandker, S. R. (2005). Microfinance and poverty: Evidence using panel data from Bangladesh. The World Bank Economic Review, 19(2), 263-286. https://doi.org/10.1093/wber/lhi008
Meyer, R. L. (2002). Track record of financial institutions in assisting the poor in Asia. ADB Institute Research Paper Series, 4(9), 1-30. http://hdl.handle.net/11540/4154
Munoz Boudet, A. M., Bhatt, A., Azcona, G., Yoo, J., & Beegle, K. (2021). A global view of poverty, gender, and household composition. https://doi.org/10.1596/1813-9450-9553
Mutua, K., Nataradol, P., Otero, M., & Chung, B. R. (1996). The view from the field: Perspectives from managers of microfinance institutions. Journal of International Development, 8(2), 179-193. https://doi.org/10.1002/(SICI)1099-1328(199603)8:2<179::AID-JID371>3.0.CO;2-Q
Prathap, B., Mahesh, K., & Karthik, K. (2018). Impact of microfinance on poverty alleviation. Journal of Management, IAEME Publication, 5(4), 278-286.
Rajper, Z. A., Ghumro, I. A., Mangi, R. A., & Lund, J. A. (2018). Assessing the role of microfinance for poverty alleviation in Sindh. SLAU Commerce and Economic Review, 4(1), 107-112.
Saad, N. M., & Duasa, J. (2010). Determinants of economic performance of micro-credit clients and prospects for Islamic microfinance in Malaysia. ISRA International Journal of Islamic Finance, 2(1), 113-130. https://doi.org/10.55188/ijif.v2i1.94
Vaessen, J., Rivas, A., Duvendack, M., Jones, R. P., Leeuw, F., Van Gils, G., ... Hombrados, J. G. (2014). The effects of microcredit on women's control over household spending in developing countries: A systematic review and meta?analysis. Campbell Systematic Reviews, 10(1), 1-205. https://doi.org/10.4073/csr.2014.8
Wilkes, V. D. (2005). Dealing with a global issue: Contributing to poverty alleviation. Corporate Governance: The International Journal of Business in Society, 5(3), 61-69. https://doi.org/10.1108/14720700510604706
Authors
Copyright (c) 2022 Heba El-Nasharty
This work is licensed under a Creative Commons Attribution 4.0 International License.
IJSSER is committed to an open-access model for publishing, ensuring that all of its content is freely available under the terms of the Creative Commons Attribution License (CC BY) 4.0. This policy empowers researchers, academicians, and the general public to freely download, copy, print, and access the links to the full texts of published materials at no cost. Furthermore, authors are encouraged to read, distribute, and submit the published works to their institution's library and any other appropriate repositories.