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Contribution of microfinance to economic growth: Transmission channel and the ways to test it


  • Alimukhamedova, Nargiza


Since its birth in 1970s microfinance has been growing rapidly with the aim to lift people out of poverty and promote economic growth. Its role and importance has been amplified amidst the global financial crisis when trust into formal banking is shaken. Despite global recognition and popularity of microfinance there is mixed evidence of its net benefits and very limited work on its contribution to financial intermediation and economic growth. This paper first, identifies and discusses possible transmission channels for microfinance and second, establishes the choice of appropriate methodology for robust empirical test. Adapted for panel data the Arellano-Bond (1991) technique allows for the Granger-Causality type test to reveal the direction of causality and overcome endogeneity issue. The main purpose of the estimation is to check whether microfinance matters - matters for financial sector development and economic growth.

Suggested Citation

  • Alimukhamedova, Nargiza, 2013. "Contribution of microfinance to economic growth: Transmission channel and the ways to test it," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 9(4), pages 1-17.
  • Handle: RePEc:ags:pdcbeh:245719
    DOI: 10.22004/ag.econ.245719

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    Cited by:

    1. Adithya Kiran Kolloju & Michele Meoli, 2022. "Efficiencies of Faith and Secular Microfinance Institutions in Regions of Asia, Africa, and Latin America: A Two-Stage Dual Efficiency Bootstrap DEA Approach," Economies, MDPI, vol. 10(3), pages 1-12, March.
    2. Sultan, Yousuf & Masih, Mansur, 2016. "Does microfinance affect economic growth? Evidence from Bangladesh based on ARDL approach," MPRA Paper 72123, University Library of Munich, Germany.
    3. Kanika Rana & Brinda Viswanathan, 2019. "Patterns of Access to Microfinance Loans in India," Review of Development and Change, , vol. 24(2), pages 259-279, December.

    More about this item


    Agricultural Finance;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries


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