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Assessing the Impact of Microfinance on Inequality: A Study of Major SAARC Nations Using Panel Causality Analysis

In: Microfinance to Combat Global Recession and Social Exclusion

Author

Listed:
  • Amit Chatterjee

    (MIT-WPU)

  • Kshitij Patil

    (MIT-WPU)

Abstract

This chapter studies the impact of microfinance on inequality for five SAARC countries, for the period 2000–2018. With the help of a Panel Estimated Generalized Least Squares (EGLS) model and by analysing causal links using the Granger Causality Test, the magnitude and direction of relationship of various macroeconomic variables and Gini Index are tested. It is found that number of borrowers significantly reduce inequality, while on the other hand the value of loans is found to be having a positive relationship with inequality. Higher value of loans might actually lead the poor into debt-traps, and thus, focussing on increasing the number of borrowers is vital. Besides the microfinance intensities, other macroeconomic factors like health expenditure, education expenditure and unemployment are found to significantly affect inequality. More importantly, the current study shows that a multi-fold approach needs to be followed, by expanding the presence of effective microfinance and having sound economic policies to increase health expenditure and reduce unemployment. Hence, the study suggests emphasizing on increasing the outreach of microfinance by increasing the number of borrowers, coupled with efficient macroeconomic policies to curb unemployment and increase government expenditure in order to tackle the problem of persistent inequality in the SAARC nations.

Suggested Citation

  • Amit Chatterjee & Kshitij Patil, 2022. "Assessing the Impact of Microfinance on Inequality: A Study of Major SAARC Nations Using Panel Causality Analysis," Springer Books, in: Ramesh Chandra Das (ed.), Microfinance to Combat Global Recession and Social Exclusion, chapter 0, pages 195-208, Springer.
    • Handle: RePEc:spr:sprchp:978-981-16-4329-3_14
    DOI: 10.1007/978-981-16-4329-3_14
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