Title
Microfinance and Household Poverty Reduction: New evidence from India
Abstract
The objective of the present study is to examine whether household access to microfinance
reduces poverty. Using national household data from India, treatment effects model is employed
to estimate the poverty-reducing effects of MFIs loans for productive purposes, such as
investment in agriculture or non-farm businesses on household poverty levels. These models take
into account the endogenous binary treatment effects and sample selection bias associated with
access to MFIs. Despite some limitations, such as those arising from potential unobservable
important determinants of access to MFIs, significant positive effect of MFI productive loans on
multidimensional welfare indicator has been confirmed. The significance of etreatment effectsf
coefficients have been verified by both Tobit and Propensity Score Matching models. In addition,
we found that loans for productive purposes were more important for poverty reduction in rural
than in urban areas. However in urban areas, simple access to MFIs has larger average
poverty-reducing effects than the access to loans from MFIs for productive purposes. This leads
to exploring service delivery opportunities that provide an additional avenue to monitor the
usage of loans to enhance the outreach.
Katsushi S. IMAI
Economics, School of Social Science, University of Manchester, UK
Thankom ARUN
Institute of Development and Policy Management, School of Environment and
Development, University of Manchester & Lancashire Business School, University of
Central Lancashire, UK
Samuel Kobina ANNIM
Economics, School of Social Science, University of Manchester, UK