Microfinance and Poverty Reduction: A Review and Synthesis of Empirical Evidence

This article examines the relationship between microfinance and poverty reduction at the macro-level, using cross-sectional data covering 596 microfinance institutions (MFIS) for 2011. The cross-sectional data are supplemented by a two-period (2005 and 2011) panel data of 1132 microfinance institutions in 57 developing countries. Taking, account of the endogeneity associated with MFIs’ loan. We show that a country with higher MFIs’ gross loan portfolio per capita tends to have lower levels of Poverty Head Count Ratio and higher level of per capita, confirming the role of microfinance in poverty reduction at the macro level and that poorer countries need to focus more on the equalizing effects of microfinance.