Microfinance and its Role in Household Poverty Reduction: Findings from Pakistan

Abstract

This study examines whether household access to microfinance reduces poverty, and if so, to what extent and across which dimensions of wellbeing. The study draws on first-hand observations and empirical data gathered from interviews of 1,132 households across 11 districts in the rural areas of the province of Punjab in Pakistan. It employs a quasi-experimental research design and makes use of data collected by interviewing both borrower (treatment) and non-borrower (control) households. Sample selection biases are controlled by matching propensity scores. Findings reveal that although borrowers seem to fare better than non-borrowers across around 70 percent of the indicators, a majority of these are not statistically significant. This suggests that despite producing some degree of positive impact, microfinance institutions still have to make sustained efforts to bring about real difference to the livelihoods of the poor.

Keywords: microfinance, poverty, impact assessment, propensity score