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Financial permeation as a role of microfinance : has microfinance actually been helpful to the poor?

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  • Inoue, Takeshi
  • Hamori, Shigeyuki

Abstract

This article is distinct in its application of the logit transformation to the poverty ratio for the purpose of empirically examining whether the financial sector helps improve standards of living for low-income people. We propose the term financial permeation to describe how financial networks expand to spread money among the poor. We measure financial permeation by three indicators related to microfinance institutions (MFIs) and then examine its effect on poverty reduction at the macro level using panel data for 90 developing countries from 1995 to 2008. We find that financial permeation has a statistically significant and robust effect on decreasing the poverty ratio.

Suggested Citation

  • Inoue, Takeshi & Hamori, Shigeyuki, 2011. "Financial permeation as a role of microfinance : has microfinance actually been helpful to the poor?," IDE Discussion Papers 299, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper299
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    References listed on IDEAS

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    Cited by:

    1. Inoue, Takeshi & Hamori, Shigeyuki, 2013. "Financial Permeation and Economic Growth: Evidence from Sub-Saharan Africa," MPRA Paper 53417, University Library of Munich, Germany.

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    More about this item

    Keywords

    Developing countries; Microfinance; Poverty; Poverty reduction; Financial permeation; Microfinance; Panel Data;
    All these keywords.

    JEL classification:

    • 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
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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