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Microfinance and Poverty—A Macro Perspective

  • Imai, Katsushi S.
  • Gaiha, Raghav
  • Thapa, Ganesh
  • Annim, Samuel Kobina

We test the hypothesis that microfinance reduces poverty at the macro level using cross-country and panel data which are constructed by the Microfinance Information Exchange data on Microfinance Institutions (MFIs) and the World Bank data. Taking account of the endogeneity associated with MFIs’ loans, we show that a country with higher MFIs’ gross loan portfolio per capita tends to have lower levels of poverty indices. Contrary to recent micro evidence, our results suggest that microfinance significantly reduces poverty at macro level and thus reinforce the case for channeling funds from development finance institutions and governments of developing countries into MFIs.

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Article provided by Elsevier in its journal World Development.

Volume (Year): 40 (2012)
Issue (Month): 8 ()
Pages: 1675-1689

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Handle: RePEc:eee:wdevel:v:40:y:2012:i:8:p:1675-1689
Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

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  1. Katsushi Imai & Thankom Arun & Samuel Kobina Annim, 2010. "Microfinance and Household Poverty Reduction: New evidence from India," The School of Economics Discussion Paper Series 1008, Economics, The University of Manchester.
  2. Dean Karlan & Jonathan Zinman, 2007. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," Working Papers 108, Center for Global Development.
  3. World Bank, 2011. "World Development Indicators 2011," World Bank Publications, The World Bank, number 2315.
  4. Robert Cull & Asli Demirguç-Kunt & Jonathan Morduch, 2007. "Financial performance and outreach: a global analysis of leading microbanks," Economic Journal, Royal Economic Society, vol. 117(517), pages F107-F133, 02.
  5. World Bank, 2010. "World Development Indicators 2010," World Bank Publications, The World Bank, number 4373.
  6. Hisako, KAI & Shigeyuki, HAMORI, 2009. "Microfinance and Inequality," MPRA Paper 17537, University Library of Munich, Germany.
  7. Katsushi S. Imai & Md. Shafiul Azam, 2010. "Does Microfinance Reduce Poverty in Bangladesh? New Evidence from Household Panel Data," Discussion Paper Series DP2010-24, Research Institute for Economics & Business Administration, Kobe University, revised Nov 2011.
  8. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  9. Shahidur R. Khandker, 2005. "Microfinance and Poverty: Evidence Using Panel Data from Bangladesh," World Bank Economic Review, World Bank Group, vol. 19(2), pages 263-286.
  10. Ahlin, Christian & Lin, Jocelyn & Maio, Michael, 2011. "Where does microfinance flourish? Microfinance institution performance in macroeconomic context," Journal of Development Economics, Elsevier, vol. 95(2), pages 105-120, July.
  11. Feigenberg, Benjamin & Field, Erica M. & Pande, Rohini, 2010. "Building Social Capital through Microfinance," Working Paper Series rwp10-019, Harvard University, John F. Kennedy School of Government.
  12. Cull , Robert & Demirguc-Kunt , Asli & Morduch, Jonathan, 2009. "Does regulatory supervision curtail microfinance profitability and outreach ?," Policy Research Working Paper Series 4948, The World Bank.
  13. Katsushi Imai & Raghav Gaiha & Ganesh Thapa, 2010. "Is the Millennium Development Goal on Poverty Still Achievable? The Role of Institutions, Finance and Openness," Oxford Development Studies, Taylor & Francis Journals, vol. 38(3), pages 309-337.
  14. Morduch, Jonathan, 1999. "The role of subsidies in microfinance: evidence from the Grameen Bank," Journal of Development Economics, Elsevier, vol. 60(1), pages 229-248, October.
  15. Martin Ravallion & Shaohua Chen & Prem Sangraula, 2009. "Dollar a Day Revisited," World Bank Economic Review, World Bank Group, vol. 23(2), pages 163-184, June.
  16. P. Mosley, 2001. "Microfinance and Poverty in Bolivia," Journal of Development Studies, Taylor & Francis Journals, vol. 37(4), pages 101-132.
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