RIEB, Kobe University

The Impact of Microfinance and its Role in Easing Poverty of Rural Households: Estimations from Pakistan

This study examines if household access to microfinance reduces poverty in Pakistan, and if so, to what extent and across which dimensions of well-being by taking account of the multi-dimensional aspect of poverty. The study draws on first-hand observations and empirical data gathered through the interviews of 1,132 households across eleven districts in the rural areas of the province of Punjab in Pakistan. We employ a quasi-experimental research design and make use of the data collected by interviewing both borrower (treatment) and non-borrower (control) households and control for sample selection biases by using propensity score matching. It has been confirmed that microfinance programmes had a positive impact on the welfare of participating households, that is, the poverty reducing-effects were observed and statistically significant on a number of indicators, including expenditure on healthcare or clothing, monthly household income, and certain dwelling characteristics, such as water supply and quality of roofing and walls.