Impact of Microfinance on Poverty Alleviation

Abstract

One of the millennium development goals i.e. “Eradicate extreme poverty & hunger” is chosen to examine the impact of microfinance on poverty alleviation in the presence of political stability as a moderating variable. Microfinance is measured, with respect to five dimensions i.e. Number of active borrowers of microfinance institutions (MFIs), Gross Loan Portfolio of MFIs, Total Assets of MFIs, Personnel working in MFIs and Equity of MFIs. To investigate impact of growth in microfinance, microfinance index is developed by using principle component analysis and then panel regression models i.e. fixed effect and random effect models are applied. Data of 32 countries from 2000 to 2012 is analyzed for checking impact of microfinance on poverty alleviation. The research concluded a positive role of microfinance in poverty alleviation.