IDEAS home Printed from https://ideas.repec.org/p/kob/dpaper/dp2011-28.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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.

Suggested Citation

  • Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2011. "The Impact of Microfinance and its Role in Easing Poverty of Rural Households: Estimations from Pakistan," Discussion Paper Series DP2011-28, Research Institute for Economics & Business Administration, Kobe University.
  • Handle: RePEc:kob:dpaper:dp2011-28
    as

    Download full text from publisher

    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-28.pdf
    File Function: First version, 2011
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tatiana Nenova & Cecile Thioro Niang & Anjum Ahmad, 2009. "Bringing Finance to Pakistan's Poor : Access to Finance for Small Enterprises and the Underserved," World Bank Publications - Books, The World Bank Group, number 13803.
    2. Karlan, Dean S. & Zinman, Jonathan, 2009. "Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila," Center Discussion Papers 52600, Yale University, Economic Growth Center.
    3. Mahjabeen, Rubana, 2008. "Microfinancing in Bangladesh: Impact on households, consumption and welfare," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1083-1092.
    4. Dehejia, Rajeev, 2005. "Practical propensity score matching: a reply to Smith and Todd," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 355-364.
    5. Shahidur R. Khandker, 2005. "Microfinance and Poverty: Evidence Using Panel Data from Bangladesh," The World Bank Economic Review, World Bank Group, vol. 19(2), pages 263-286.
    6. Imai, Katsushi S. & Arun, Thankom & Annim, Samuel Kobina, 2010. "Microfinance and Household Poverty Reduction: New Evidence from India," World Development, Elsevier, vol. 38(12), pages 1760-1774, December.
    7. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
    8. Todd, Petra E., 2008. "Evaluating Social Programs with Endogenous Program Placement and Selection of the Treated," Handbook of Development Economics, in: T. Paul Schultz & John A. Strauss (ed.), Handbook of Development Economics, edition 1, volume 4, chapter 60, pages 3847-3894, Elsevier.
    9. World Bank, 2007. "Pakistan : Promoting Rural Growth and Poverty Reduction," World Bank Publications - Reports 7984, The World Bank Group.
    10. 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.
    11. Imran Matin & Munshi Sulaiman & Mehnaz Rabbani, 2008. "Crafting a Graduation Pathway for the Ultra Poor," Working Papers id:1548, eSocialSciences.
    12. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
    13. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    14. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI).
    15. 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.
    16. Marguerite S. Robinson, 2001. "The Microfinance Revolution," World Bank Publications - Books, The World Bank Group, number 28956.
    17. International Monetary Fund, 2010. "Pakistan: Poverty Reduction Strategy Paper," IMF Staff Country Reports 2010/183, International Monetary Fund.
    18. World Bank, 2002. "Poverty Assessment : Poverty in Pakistan - Vulnerabilities, Social Caps, and Rural Dynamics," World Bank Publications - Reports 15335, The World Bank Group.
    19. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khan, Tahsina & Khanam, Shamsun Nahar & Rahman, Md Habibur & Rahman, Syed Mahbubur, 2019. "Determinants of microfinance facility for installing solar home system (SHS) in rural Bangladesh," Energy Policy, Elsevier, vol. 132(C), pages 299-308.
    2. Farah Said, 2016. "Access to Finance and Agency: An Overview of the Constraints to Female-Run Enterprises," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 21(Special E), pages 331-349, September.
    3. Mathilde Maîtrot & Miguel Niño-Zarazúa, 2017. "Poverty and wellbeing impacts of microfinance: What do we know?," WIDER Working Paper Series 190, World Institute for Development Economic Research (UNU-WIDER).
    4. Koffi Sodokin, 2022. "Access to Microfinance Institutions and Official Banks and the Impact on Small Business in Togo," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(1), pages 1-46, January.
    5. Nordjo, R. & Adjasi, C., 2018. "The Impact of Finance on Welfare of Smallholder Farm Household in Ghana," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277142, International Association of Agricultural Economists.
    6. Abdo Ali Homaid & Ali Yusob Md Zain & Yahya Ali Al-Matari & Mohd Sobri Minai & Fais Bin Ahmad, 2017. "The Role of Customer-focused Strategies to Improve Islamic Microfinance Institutions Performance: Empirical Evidence and Lessons from Yemen," International Review of Management and Marketing, Econjournals, vol. 7(1), pages 291-299.
    7. Mathilde Maîtrot & Miguel Niño-Zarazúa, 2017. "Poverty and wellbeing impacts of microfinance: What do we know?," WIDER Working Paper Series wp-2017-190, World Institute for Development Economic Research (UNU-WIDER).
    8. Kifayat Ullah & Abdul Qayyum Mohsin & Abdul Saboor & Saranjam Baig, 2020. "Financial Inclusion, Socioeconomic Disaster Risks and Sustainable Mountain Development: Empirical Evidence from the Karakoram Valleys of Pakistan," Sustainability, MDPI, vol. 12(22), pages 1-26, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2012. "Microfinance and its role in household poverty reduction: findings from Pakistan," Global Development Institute Working Paper Series 17312, GDI, The University of Manchester.
    2. Katsushi S. Imai & MD. Shafiul Azam, 2011. "Does Microfinance Reduce Poverty in Bangladesh? New Evidence from Household Panel Data," Journal of Development Studies, Taylor & Francis Journals, vol. 48(5), pages 633-653, October.
    3. Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2015. "Microfinance and Household Poverty Reduction: Empirical Evidence from Rural Pakistan," Oxford Development Studies, Taylor & Francis Journals, vol. 43(1), pages 84-104, March.
    4. Katsushi Imai & Thankom Arun, 2008. "Does Microfinance Reduce Poverty in India?," Economics Discussion Paper Series 0814, Economics, The University of Manchester.
    5. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, February.
    6. Paudel, G. & Krishna, V. & McDonald, A., 2018. "Why some inferior technologies succeed? Examining the diffusion and impacts of rotavator tillage in Nepal Terai," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277149, International Association of Agricultural Economists.
    7. Thanh, Pham Tien & Saito, Katsuhiro & Duong, Pham Bao, 2019. "Impact of microcredit on rural household welfare and economic growth in Vietnam," Journal of Policy Modeling, Elsevier, vol. 41(1), pages 120-139.
    8. Giuseppe PORRO & Stefano Maria IACUS, 2004. "Average treatment effect estimation via random recursive partitioning," Departmental Working Papers 2004-28, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    9. Waqas Umar Latif & Sana Ullah & Wasim Ahmed & Muhammad Umar Sultan & Rana Muhammad Sohail Jafar & Muhammad Tariq & Wang Linping, 2020. "Microcredit and Economic Welfare: Experience of Poor Rural Households from Pakistan," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(6), pages 976-997, August.
    10. Raghbendra Jha & Katsushi S. Imai & Raghav Gaiha, 2008. "Poverty, Undernutrition and Vulnerability in Rural India: Public Works versus Food Subsidy," ASARC Working Papers 2008-08, The Australian National University, Australia South Asia Research Centre.
    11. Maren Duvendack & Richard Palmer-Jones, 2012. "High Noon for Microfinance Impact Evaluations: Re-investigating the Evidence from Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 48(12), pages 1864-1880, December.
    12. Henson, Spencer & Masakure, Oliver & Cranfield, John, 2011. "Do Fresh Produce Exporters in Sub-Saharan Africa Benefit from GlobalGAP Certification?," World Development, Elsevier, vol. 39(3), pages 375-386, March.
    13. Dettmann, E. & Becker, C. & Schmeißer, C., 2011. "Distance functions for matching in small samples," Computational Statistics & Data Analysis, Elsevier, vol. 55(5), pages 1942-1960, May.
    14. Iacus, Stefano M. & Porro, Giuseppe, 2007. "Missing data imputation, matching and other applications of random recursive partitioning," Computational Statistics & Data Analysis, Elsevier, vol. 52(2), pages 773-789, October.
    15. Islam, Asadul & Nguyen, Chau & Smyth, Russell, 2015. "Does microfinance change informal lending in village economies? Evidence from Bangladesh," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 141-156.
    16. David McKenzie & John Gibson & Steven Stillman, 2010. "How Important Is Selection? Experimental vs. Non-Experimental Measures of the Income Gains from Migration," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 913-945, June.
    17. Marisa Coetzee, 2013. "Finding the Benefits: Estimating the Impact of The South African Child Support Grant," South African Journal of Economics, Economic Society of South Africa, vol. 81(3), pages 427-450, September.
    18. Tommaso Nannicini, 2007. "Simulation-based sensitivity analysis for matching estimators," Stata Journal, StataCorp LP, vol. 7(3), pages 334-350, September.
    19. McKenzie, David & Gibson, John & Stillman, Steven, 2006. "How important is selection ? Experimental versus non-experimental measures of the income gains from migration," Policy Research Working Paper Series 3906, The World Bank.
    20. Dettmann, Eva & Becker, Claudia & Schmeißer, Christian, 2010. "Is there a Superior Distance Function for Matching in Small Samples?," IWH Discussion Papers 3/2010, Halle Institute for Economic Research (IWH).

    More about this item

    Keywords

    Microfinance; Poverty; Impact assessment; Propensity score matching; Pakistan;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2011-28. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/rikobjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University (email available below). General contact details of provider: https://edirc.repec.org/data/rikobjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.