Does microfinance affect income inequality?

Hermes, Niels

doi:10.1080/00036846.2013.864039

Cited by 80 publications

(112 citation statements)

References 39 publications

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“…Besides these arguments identified in previous literature (Hermes, ; Kai & Hamori, ), we argue the income inequality reduction effect of microfinance for at least four main additional reasons. First, the practice of so‐called “stepped lending”, in which a borrower begins with a very small loan, repays it and qualifies for successive loans at higher values and better financial conditions, until a business formalization process has been achieved.…”

Section: Microfinance To Reduce Income Inequalitysupporting

confidence: 71%

“…Following previous literature, in this paper we posit that microfinance has a positive impact on inequality reduction because it disproportionately gives opportunities to the poor and not to the rich (Hermes, ). Whereas top income earners can easily obtain a bank account or a loan, others rely on their limited savings to invest in education, health or entrepreneurship, suggesting that financial inequality and income inequality go hand in hand (Dabla‐Norris, Kochhar et al., ).…”

Section: Microfinance To Reduce Income Inequalitymentioning

confidence: 89%

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Microfinance and income inequality: New macrolevel evidence

Lacalle-Calderón

Ramos

Garrido

et al. 2018

Review Development Economics

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This paper addresses the empirical question of whether microfinance has any impact on income inequality at the macrolevel. Very little research has been conducted on the relationship between the macrolevel scale of microfinance and income inequality over time in a country and across countries. Based on panel‐data techniques, with annual data from 85 countries from 2001 to 2012 and a broad theoretical framework on microfinance and inequality, we provide empirical evidence that suggests that increases in the macrolevel scale of microcredit in a country contribute to reducing income inequality within that country over time. Finally, since microfinance may be endogenous, we used instruments from the existing literature to control for this problem.

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Section: Microfinance To Reduce Income Inequalitysupporting

confidence: 71%

Section: Microfinance To Reduce Income Inequalitymentioning

confidence: 89%

Microfinance and income inequality: New macrolevel evidence

Lacalle-Calderón

Ramos

Garrido

et al. 2018

Review Development Economics

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“…Our findings are also in line with earlier studies by Kai and Hamori () on microfinance's potential for reducing inequality, and by Hermes () on reducing the income gap between rich and poor. Although in our study we do not explicitly measure the effect of microfinance on poverty, our Gini coefficient results could also be related to previous empirical findings on the poverty reducing capacity of microfinance programmes (see Imai et al, ; Coleman, , ; and most RCT studies).…”

Section: Results Discussion and Implicationssupporting

confidence: 93%

“…In the microfinance context, to the best of our knowledge, cluster analysis has never been used. There are several studies that analyse the external environment for MFI operations (Ahlin et al, ; Vanroose, , ; Vanroose & D'Espallier, ) and the economy‐wide effect of microfinance itself (Kai & Hamori, ; Imai et al, ; Hermes, ; Lopatta & Tchikov, , ; Lacalle‐Calderón et al, ; Donou‐Adonsou & Sylwester, ; Agbola et al, ). Most of these studies, however, exploit cross‐section or panel‐data analysis to find the macro‐institutional factors important for microfinance operations without explicit grouping or clustering.…”

Section: Methodsmentioning

confidence: 99%

The microfinance promise—can it be kept? A macro perspective

Alimukhamedova

2019

Development Policy Review

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After five decades of rapid expansion of microfinance worldwide, little is known about its aggregate effects and whether the “microfinance promise” of poverty reduction holds at the macro level. Challenging questions have arisen. Here we explore the dynamic response of microfinance on economic growth, financial deepening and income inequality. Countries are grouped into three broad clusters (stable, moderate and poor) based on macro‐institutional variables. Our results show that microfinance has a significant long‐term ability to affect the broader economy. However, the impact and dynamics of microfinance differ substantially across macro‐institutional environments. It grows in weaker environments, reaches its peak in developing economies, and then gradually “dies out” in more stable economies. While there is evidence of a positive impact of microfinance at the aggregate level, the response is different depending on whether countries are poor, moderately developed or economically stable. Once countries climb up the macro‐institutional “ladder,” microfinance can take a different shape and its relationship with other macroeconomic fundamentals can change. Our results indicate that microfinance has the strongest effect when the external environment is supportive and proactive; in weak environments, microfinance cannot grow sufficiently. Therefore, more attention should be given to supporting the socioeconomic dimensions of economies.

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“…Microfinance projects must ascertain needs of the community and potential entrepreneurs for successful business start-ups. Hermes (2014) and Sherman (1999) studied intervention effectiveness of business start-ups, and each study emphasized the essentials of typical business start-ups.…”

mentioning

confidence: 99%

The Merits of Specialized Microfinance Instruments and Their Feasibility in Alleviating Poverty in Albany-Dougherty County, Georgia

Nwaokoro¹,

Ojemakinde²,

Washington³

2017

IJFR

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Albany-Dougherty County, Georgia has poverty-related indexes that include unemployment and economic disparity. The high unemployment and deteriorating economic climate can be traced to an exodus of major manufacturing employers. Public health issues and educational services continue to decline. These proxies of misery must be addressed by a contemporary mix of market related factors of financing and entrepreneurial enthusiasm. This research addresses the ever increasing poverty and related challenges on the road to prosperity. Secondly, this exploratory study highlights the relevance of a mix of micro-financing instruments that could assist the community to engage market-based economic activities that could enhance economic profiles. Based on the data collected with a survey instrument, the study highlights an apparent reluctance of concessionary financial institutions to lend.

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Does microfinance affect income inequality?

Cited by 80 publications

References 39 publications

Microfinance and income inequality: New macrolevel evidence

Microfinance and income inequality: New macrolevel evidence

The microfinance promise—can it be kept? A macro perspective

The Merits of Specialized Microfinance Instruments and Their Feasibility in Alleviating Poverty in Albany-Dougherty County, Georgia

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