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The Impact of Microfinance and its Role in Easing Poverty of Rural Households: Estimations from Pakistan

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Author Info

  • Asad K. Ghalib

    (Brooks World Poverty Institute, University of Manchester, UK)

  • Issam Malki

    (Departmaent of Economics, University of Bath, UK)

  • Katsushi S. Imai

    (Economics, School of Social Sciences, University of Manchester (UK) and RIEB, Kobe University (Japan))

Abstract

This study examines if household access to microfinance reduces poverty in Pakistan, and if so, to what extent and across which dimensions of well-being by taking account of the multi-dimensional aspect of poverty. The study draws on first-hand observations and empirical data gathered through the interviews of 1,132 households across eleven districts in the rural areas of the province of Punjab in Pakistan. We employ a quasi-experimental research design and make use of the data collected by interviewing both borrower (treatment) and non-borrower (control) households and control for sample selection biases by using propensity score matching. It has been confirmed that microfinance programmes had a positive impact on the welfare of participating households, that is, the poverty reducing-effects were observed and statistically significant on a number of indicators, including expenditure on healthcare or clothing, monthly household income, and certain dwelling characteristics, such as water supply and quality of roofing and walls.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-28.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2011-28.

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Length: 33 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:kob:dpaper:dp2011-28

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Keywords: Microfinance; Poverty; Impact assessment; Propensity score matching; Pakistan;

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References

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  1. Khandker, Shahidur R., 2003. "Microfinance and poverty - evidence using panel data from Bangladesh," Policy Research Working Paper Series 2945, The World Bank.
  2. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
  3. Dehejia, Rajeev, 2005. "Practical propensity score matching: a reply to Smith and Todd," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 355-364.
  4. Jeffrey Smith & Petra Todd, 2003. "Does Matching Overcome Lalonde's Critique of Nonexperimental Estimators?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20035, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  5. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  6. Conning, Jonathan, 1999. "Outreach, sustainability and leverage in monitored and peer-monitored lending," Journal of Development Economics, Elsevier, vol. 60(1), pages 51-77, October.
  7. Mahjabeen, Rubana, 2008. "Microfinancing in Bangladesh: Impact on households, consumption and welfare," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1083-1092.
  8. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI).
  9. Goetz, Anne Marie & Gupta, Rina Sen, 1996. "Who takes the credit? Gender, power, and control over loan use in rural credit programs in Bangladesh," World Development, Elsevier, vol. 24(1), pages 45-63, January.
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