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Does microfinance reduce poverty? Some international evidence

  • Quanda Zhang ORCID logo EMAIL logo

Abstract

In this paper, the hypothesis that microfinance is an effective tool for reducing poverty at the macro level is tested using a unique cross-country panel data set from 106 countries for the period 1998–2013. Taking into account the potential problem of sample selection bias and endogeneity, this paper shows that microfinance has a negative effect on poverty. The results are robust to the choice of microfinance measures and poverty indicators. They suggest that in developing and emerging countries, the establishment of more MFIs should be encouraged, and more funds should be directed from development agencies and governments into MFIs, to reduce poverty.

JEL Classification: I32; E61; G21; C33

Acknowledgement

I would like thank Alberto Posso and George Tawadros for their excellent research guidance and support throughout this study. I also thank two anonymous referees for their helpful comments on an earlier version of this article. Any remaining error, however, is my own responsibility.

A Appendix

List of countries

Asia and PacificMiddle East and North AfricaSub-Saharan Africa
Bangladesh (3)Egypt (3)Angola (2)
Bhutan (3)Iraq (2)Benin (2)
Cambodia (6)Jordan (4)Botswana (2)
China (6)Mauritania (3)Burkina Faso (3)
Fiji (2)Morocco (3)Burundi (2)
India (3)Syria (1)Cape Verde (2)
Indonesia (6)Tunisia (3)Cameroon (2)
Laos (3)Turkey (10)Central African (2)
Malaysia (3)Yemen (20)Chad (2)
Nepal (2)Comoros (1)
Pakistan (6)Democratic Republic Of Congo (1)
Philippines (5)Republic Of Congo (2)
Sri Lanka (3)Cote D’Ivoire (3)
Thailand (7)Djibouti (1)
Vietnam (7)Ethiopia (3)
Gabon (1)
Gambia (2)
Latin America and CaribbeanEastern Europe and Central AsiaGhana (2)
Argentina (14)Albania (5)Guinea (3)
Belize (2)Armenia (13)Kenya (1)
Bolivia (12)Azerbaijan (6)Lesotho (2)
Brazil (13)Bosnia and Herzegovina (3)Liberia (1)
Chile (6)Bulgaria (6)Madagascar (4)
Colombia (14)Croatia (6)Malawi (2)
Costa Rica (15)Georgia (15)Mali (3)
Dominican (13)Kazakhstan (9)Mauritius (2)
Ecuador (13)Kyrgyzstan (13)Mozambique (2)
El Salvador (15)Lithuania (11)Namibia (2)
Guatemala (7)Macedonia (8)Niger (3)
Haiti (1)Moldova (13)Nigeria (2)
Honduras (13)Montenegro (7)Rwanda (3)
Jamaica (4)Poland (13)Sao Tome and Principe (2)
Mexico (9)Romania (14)Senegal (3)
Nicaragua (4)Russia (10)Sierra Leone (2)
Panama (14)Serbia (9)South Africa (4)
Paraguay (13)Slovak (7)Swaziland (2)
Peru (15)Tajikistan (5)Tanzania (3)
Suriname (1)Ukraine (10)Togo (2)
Uruguay (14)Uganda (5)
Venezuela (8)Zambia (5)
  1. Number of observations (poverty headcount ratio at $1.25 a day) from each country in brackets. According to the data set from the World Bank, all the four poverty indicators have the same number of observations for the period 1998–2013.

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Published Online: 2017-5-10

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