New Economics Papers
on Microfinance
Issue of 2010‒10‒09
two papers chosen by
Aastha Pudasainee and Olivier Dagnelie
  1. Does Microfinance Reduce Poverty in Bangladesh? New Evidence from Household Panel Data By Katsushi S. Imai; Md. Shafiul Azam
  2. Analysis of Poverty Reducing Effects of Microfinance from a Macro Perspective: Evidence from Cross-Country Data By Katsushi S. Imai; Raghav Gaiha; Ganesh Thapa; Samuel Kobina Annim
  1. By: Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester, UK and Research Institute for Economics & Business Administration, Kobe University, Japan); Md. Shafiul Azam (Economics, School of Social Sciences, University of Manchester, UK)
    Abstract: The purpose of the present study is to examine whether microfinance reduces poverty in Bangladesh drawing upon the nationally representative household panel data covering 4 rounds from 1997 to 2005. A special attention was drawn to the issue of endogeneity by applying treatment effects model and propensity score matching (PSM) for the participants and non-participants of microfinance programmes. It has been found by treatment effects model applied to panel data that the simple household access to general loans from microfinance institutions (MFIs) did not increase per capita household income significantly, but household access to loans for productive purposes from MFIs significantly increased per capita household income. This suggests that the purpose and monitoring of how clients use the loans is important for increasing household income, and thus decreasing household poverty. However, the application of treatment effects model and PSM to each cross-sectional component of the panel data shows that the poverty reducing effect of MFI on poverty was significantly reduced over the years. This suggests the importance of more attention to the primary purpose of microcredit, that is, poverty reduction, and also to monitoring loan usages in the situations where the profits of MFIs became increasingly squeezed and their activities became more commercialised under severe competitions among MFIs in recent years.
    Keywords: microfinance, MFI (microfinance institution), microcredit, poverty, Bangladesh
    JEL: C30 C31 G21 I32
    Date: 2010–09
    URL: http://d.repec.org/n?u=RePEc:kob:dpaper:dp2010-24&r=mfd
  2. By: Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester, UK and Research Institute for Economics & Business Administration, Kobe University, Japan); Raghav Gaiha (Massachusetts Institute of Technology, USA & Faculty of Management Studies, University of Delhi, India); Ganesh Thapa (International Fund for Agricultural Development, Italy); Samuel Kobina Annim (Economics, School of Social Sciences, University of Manchester, UK)
    Abstract: This paper tests the hypothesis that microfinance reduces poverty at macro level using the cross-country data in 2007. The results of econometric estimation for poverty head count ratio show, taking account of the endogeneity associated with loans from microfinance institutions (MFIs), that microfinance loans significantly reduce poverty. Thus, a country with higher MFI’s gross loan portfolio tends to have lower poverty incidence after controlling the other factors influencing poverty. We also found that poverty reducing effect tends to be larger in Sub Saharan Africa (SSA) as suggested by the negative and significant coefficient estimate of the SSA dummy and gross loan portfolio. From a policy perspective, our results would justify increase in investment from development finance institutions and governments of developing countries into microfinance loans as a means of poverty reduction.
    Date: 2010–09
    URL: http://d.repec.org/n?u=RePEc:kob:dpaper:dp2010-25&r=mfd
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