A systematic review of the impact of microfinance on poverty.



* Microfinance evaluations reveal a positive impact on per capita income, n9on-land asset value and poverty incidence.

* Across countries and methodologies, microfinance is most likely to have a short-term positive effect; regionally, the most positive impacts are seen in Africa.

* Women tend to benefit the most from microfinance.

* Better off households tend to benefit more from microfinance initiatives than poorer ones.

Since its institutionalization about 35 years ago, microfinance has been promoted and supported by foreign aid as an innovative tool against poverty and vulnerability. Microfinance has proved not only to allow the poor to access credit, but because it often relies on group-lending also encourages peer sharing while reducing transaction costs to the lender by achieving economies of scale. Although microfinance has been examined under various socio-economic conditions, , there is no consensus on the impact it has had on poverty reduction. Given this, it is important to review the available literature to assess whether any clear conclusions can be drawn about the impact microfinance on poverty.


It remains difficult to establish clear, robust and incontestable evidence of microfinance 's impact on poverty and well-being: Reported impact varies greatly across countries and also by research design, with findings even conflicting in some cases. There are three main quantitative research designs used to assess the impact of microfinance on poverty. First non-experimental methods measure impacts on treatment and control groups without random assign to treatment of a particular population. Second, quasi-experimental methods compare the outcomes of an intervention with a simulation of what would have happened had there been no intervention. Third randomised experimental designs which allow for more robust causal inference by the virtue of randomisation of both treatment and control beneficiaries. It is important to take a broad look at experimental and quasi-experimental studies on microfinance in order to understand what these different methods can tell us about its effectiveness.


Using the data obtained from a number of quantative academic studies on microfinance it is possible to examine the reported impact of microfinance on the following poverty dimensions: income and non-food expenditures; food consumption, children's education, health outcomes, asset and poverty incidence.

After examining...

To continue reading