Reducing Poverty Through Microfinance in Developing Economies

Abstract

This chapter critically examines how microfinance has been used to reduce poverty rates in developing economies. To achieve this goal, a critical review of existing literature on microfinance outcomes on reducing poverty in developing countries was carried out. Based on the review of literature, this chapter concludes that microfinance positively impact poverty levels in developing countries. However, the chapter also shows that access to microfinance may contribute to higher poverty rates as some studies have produced marginal or negative success, while others yielded positive successes, making it very difficult to generalise the outcomes. The growing popularity of microfinance as a financial inclusion strategy and the high number of empirical studies on the subject have produced new evidence that needs further examination with complex research methodologies to determine its impact on poverty reduction, as outcomes of the current studies are mixed.