World Development Vol. 40, No. 8, pp.

1675–1689, 2012
Ó 2012 Elsevier Ltd. All rights reserved.
0305-750X/$ - see front matter
www.elsevier.com/locate/worlddev
http://dx.doi.org/10.1016/j.worlddev.2012.04.013

Microfinance and Poverty—A Macro Perspective

KATSUSHI S. IMAI
University of Manchester, UK

RAGHAV GAIHA
Massachusetts Institute of Technology, USA
University of Delhi, India

GANESH THAPA
International Fund for Agricultural Development, Italy

and

SAMUEL KOBINA ANNIM *

University of Cape Coast, Ghana
University of Central Lancashire, UK
Summary. — We test the hypothesis that microfinance reduces poverty at the macro level using cross-country and panel data which are
constructed by the Microfinance Information Exchange data on Microfinance Institutions (MFIs) and the World Bank data. Taking
account of the endogeneity associated with MFIs’ loans, we show that a country with higher MFIs’ gross loan portfolio per capita tends
to have lower levels of poverty indices. Contrary to recent micro evidence, our results suggest that microfinance significantly reduces
poverty at macro level and thus reinforce the case for channeling funds from development finance institutions and governments of devel-
oping countries into MFIs.
Ó 2012 Elsevier Ltd. All rights reserved.

Key words — microfinance, poverty, loan portfolio, macro and global

1. INTRODUCTION these studies. In view of this, studies that have recently

Most of the recent studies of the impact of microfinance on
poverty or income have relied on micro-level evidence based
on household data or entrepreneurial data (e.g., Hulme &
Mosley, 1996; Imai, Arun, & Annim, 2010a, 2010b; Khand-
ker, 2005; Mosley, 2001). Due to the scarcity of reliable macro
data on microfinance, macro-level studies of the impact of
microfinance on poverty are rather limited. However, there
are a few recent works that investigate the relationship be-
tween the macro economy and microfinance activities and/or
performance, such as Ahlin, Lin, and Maio (2011), Ahlin
and Lin (2006) and Kai and Hamori (2009), among others.
The thrust of these studies is either to examine the environ-
mental context in which microfinance operates, or investigate
the potential effect of microfinance on key macroeconomic
variables, such as gross domestic product or inequality. The
findings of a significant relationship between operations of
Microfinance Institutions (MFIs) and the macro economy cor-
roborate the recent evidence based on household data sets
which posits that microfinance has a poverty reducing effect
(e.g., Gaiha & Nandhi, 2009; Imai et al., 2010a, 2010b;
Khandker, 2005).
This study redirects the attention to macro studies given the
mixed results of microfinance impact studies at the micro level
in recent years. As the separation of causal effects of micro-
credit from selection effects is unsatisfactory in many of the
micro-level studies, Armendariz and Morduch (2005) pointed
to a potential bias arising in the impact of microfinance in
1675
emerged have used one of the following three approaches: (i)
randomized control trials (Banerjee, Duflo, Glennerster, &
Kinnan, 2009; Feigenberg, Field, & Pande, 2010; Karlan &
Zinman, 2010); (ii) financial diaries/portfolios of the poor
(Collins, Morduch, Rutherford, & Ruthven, 2009) and (iii)
use of other variants of quasi-experimental estimation tech-
niques such as treatments effect and propensity score matching
in both cross-sectional and panel data setting (Imai et al.,
2010a, 2010b). Evidence from such studies remains mixed
due to different microfinance outcome measures and/or differ-
ent methodologies adopted by these studies, leading to the per-
ception that microfinance is likely to have little impact on
poverty. 1 Our econometric analysis points to robust poverty
reducing effects of microfinance, as elaborated below.
* This study is funded by IFAD (International Fund for Agricultural D-
evelopment). We are grateful to Thomas Elhaut, Director of Asia and the
Pacific Division, IFAD, for his support and guidance throughout this
study. The first author thanks generous research support from RIEB,
Kobe University, during his stay in 2010, and valuable comments from
Shoji Nishijima, Takahiro Sato, and seminar participants at Kobe Univ-
ersity. The second author would like to thank Bish Sanyal for the invit-
ation to work at MIT’s Department of Urban Studies, where a first draft
was prepared. We have also benefited from the comments of Thankom
Arun and M.D. Azam. The views expressed are, however, personal and
not necessarily of the organizations to which we are affiliated. Final rev-
ision accepted: February 29, 2012.
1676 WORLD DEVELOPMENT
The challenges for empirical macro studies of microfinance
include: (a) identifying an appropriate measure of microfi-
nance activities, in terms of “availability” or “intensity”; (b)
identifying the effects of “performance,” distinguished from
“presence” and “scale” of microfinance on macro indicators;
and (c) examining the robustness of coefficient estimates re-
lated to microfinance. Building on the small but emerging lit-
erature on analyzing the impacts of microfinance from a
macro perspective, the present study aims to examine the rela-
tionship between MFI’s gross loan portfolio per capita and
FGT class of poverty indices. 2 The results would be useful
for development agencies, governments, and other investors,
as there are important implications for microfinance’s poten-
tial role in reducing poverty at macro level. Our counterfactual
simulations illustrate the possible effects on aggregate poverty
expected from the decrease in MFIs’ gross loan portfolio per
capita, GDP per capita, or domestic credit which may be
caused as a consequence of global recession or financial crisis.
Drawing upon econometric estimations of the cross-country
data—including a panel—we find consistently that a country
with higher MFIs’ gross loan portfolio per capita tends to
have lower levels of FGT class of poverty indices, which cor-
roborates the poverty reducing role of microfinance. It is nota-
ble that microfinance loans per capita are negatively
associated with not only the poverty headcount ratio, but also
with the poverty gap and squared poverty gap, implying that
even the poorest benefit from them.
The rest of the paper is organized as follows. The next sec-
tion provides a brief explanation of the data which the present
study draws upon. Econometric specifications are discussed in
Section 3. The main results and simulations are given in Sec-
tions 4 and 5, respectively. The final section offers concluding
observations.
2. DATA
The present study analyzes the role of microfinance—vol-
ume/scale of activities (not performance/quality)—on poverty,
using cross-sectional data covering 48 countries in the devel-
oping regions for 2007. 3 The cross-sectional data are supple-
mented by a two-period (2003 and 2007) panel covering 61
countries. 4 This is based on the data generated by Microfi-
nance Information Exchange (2010) or MIX and the World
Development Indicators 2011 (World Bank, 2011). Launched
in 2002, MIX provides industry, country, and regional level
data on microfinance outreach and financial performance indi-
cators. The information marketplace collates reports of (self-
reporting) MFIs annually, based on: (i) pre-determined for-
mats and reporting standards; (ii) validation of information
received with both internal and external cross checking sys-
tems; and (iii) standardization of data to facilitate comparison.
Interpreting and further processing the data, however, require
a great deal of caution because (i) MIX may not be able to
send questionnaires to all the MFIs in the country—in partic-
ular if MFIs are small and recent, (ii) not all the MFIs sur-
veyed by MIX respond (sample selection bias), and (iii)
“self-reporting” may be a source of measurement errors even
if MIX imposes the careful cross-checking systems and the
reliability of the data is ranked by MIX (Ahlin et al., 2011).
It is not possible to know the extent of the errors arising from
these factors, but the MIX data provide the most comprehen-
sive and largest data on microfinance activities (Cull, Demi-
rgücß-Kunt, & Morduch, 2011) and the data cover a large
fraction of microfinance customers worldwide (Cull, Demi-
rgücß-Kunt, & Morduch, 2007). 5
To cross-check the potential bias arising from self-selection,
the current study estimates variants of econometric models
with different sub-samples, based on several criteria such as ex-
tent of validity of data submitted by MFIs (see Ahlin et al.,
2011 for details). We have found that the results are broadly
similar and consistent irrespective of which sub-samples are in-
cluded. Also, we have compared the gross loan portfolio of
MFI per capita (based on the MIX data)—a dependent vari-
able in our models—with three variables on microfinance
activity at country levels available from WDI 2011; (a)
branches, microfinance institutions (per 100,000 adults); (b)
deposit accounts, microfinance institutions (per 1000 adults);
and (c) loan accounts, microfinance institutions (per 1000
adults). We have consistently found that a pair-wise correla-
tion is positive and significant for all the three variables 6
and hence surmise that the MIX data aggregated at country
levels represent actual performance of MFIs.
It is noted that relatively few studies have used a measure of
microfinance operations (volume/scale) in a country based on
the MIX data. Also, the present study uses the World Bank
poverty estimates, released in 2008 (Chen & Ravallion, 2008;
Ravallion, Chen, & Sangraula, 2008). These poverty estimates
are based on the poverty line of US$1.25 (based on PPP—Pur-
chasing Power Parity) per day in 2005, and cover a wider
range of countries than the previous estimates (based on a
poverty line of $1.08 on 1993 PPP). While there are many
studies based on the latter, those based on the more recent
poverty estimates are still few. 7 Also, as noted earlier, we
use the FGT class of poverty indices.
With a view to measuring microfinance activities in a coun-
try, we rely mainly on Gross Loan Portfolio (GLP) (divided by
the total population) given that it measures actual funds dis-
bursed to households. Total GLP of MFIs aggregated for each
country is adjusted for write-offs and inflation. This is a bench-
mark indicator generated by MIX. Standardization of raw
data facilitates meaningful comparison of benchmark indica-
tors (MIE, 2010). Other variables in the poverty equation in-
clude gross domestic product per capita, domestic credit as a
share of GDP, and regional dummies. 8 While a robust inverse
relationship between poverty and GDP per capita is confirmed
in extant literature, share of domestic credit in GDP has a
more complex role partly because financial development is
both a cause and result of growth. It is, however, plausible
that when financial development is low there may be a mutu-
ally reinforcing relationship between financial development
and microfinance. Finally, as poverty is conditioned on many
unobservable regional characteristics (e.g., vulnerability to
natural shocks), regional dummies are used.
3. SPECIFICATION OF MODELS AND ESTIMATION
Our analysis is based on the data for 2007 (for cross-sec-
tional estimations), and 2003 and 2007 (for panel data estima-
tions), not only because extensive and reliable historical data
on microfinance do not exist 9 but also because international
poverty estimates are available only for one or two specific
years for most of the countries. 10 As a result, country panel
data of poverty are unbalanced, as shown in Appendix 4.
We apply both OLS (Ordinary Least Squares) and IV
(Instrumental Variable) model or 2SLS (Two Stage Least
Squares) to estimate the effect of gross loan portfolio per capi-
ta of MFIs on poverty. 2SLS involves two stages: gross loan
portfolio per capita of MFIs is estimated by an instrumental
variable and other covariates in the first stage and in the sec-
ond poverty head count ratio is estimated by the predicted
 MICROFINANCE AND POVERTY—A MACRO PERSPECTIVE 1677

gross loan portfolio per capita and other covariates. The use
of IV is necessary because gross loan portfolio per capita of
microfinance is likely to be endogenous in the poverty equa-
tion. Here the endogeneity is associated with the bi-casual
relationship between gross loan portfolio per capita and pov-
erty levels in a country. This reverse causality from poverty to
gross loan portfolio per capita may arise, for example, if pov-
erty-oriented development partners and governments provide
more funds to MFIs located in poorer countries.
Given the difficulty in finding a valid instrument that satis-
fies “an exclusion restriction,” that is, correlates with gross
loan portfolio per capita but does not have a direct causal ef-
fect on poverty, this papers uses two kinds of instrument, cost
of enforcing contract and a lag of 5-year average of gross loan
portfolio weighted by the number of MFIs for each coun-
try. 11 The unit of analysis for the econometric analysis is Figure 2. Trends and Patterns of Number of Active Borrower. Source:
country. Authors’ compilation from MIX Data.
Eqns. (1) and (2) describe, respectively, the structural and
reduced form of least squares used in estimating the relation- for each country) and X is the vector of all the other explana-
ship between gross loan portfolio per capita and poverty. tory variables considered in Eqn. (1). The respective indepen-
dently and identically distributed (i.i.d.) error terms for the
Povi ¼ b0 þ b1 GLP i þ b2 GDPPC i þ b3 Domestic Crd i
two equations are denoted by “u” and “t.”
þ b4 REGi þ ui ð1Þ In addition to the cross-sectional estimations, we generate
panel data for 2003 and 2007 for all the variables 12 and esti-
GLP i ¼ p0 þ p1 enfconti þ p2 lag5yrsGLP l þ p3 Xi þ ti ð2Þ mate linear panel models. This construction enables us to
examine the robustness of our coefficients as the panel data
where “Pov” indicates poverty head count ratio (or poverty estimation takes account of changes of variables over time
gap; squared poverty gap); “GLP” represents gross loan port- and unobservable country or regional-level effects. Our aim
folio; “GDPPC” denotes gross domestic product per capita (at is to further examine the hypothesis that higher gross loan
2000 constant USD prices); “Domcred” indicates domestic portfolio per capita leads to poverty reduction at macro level.
credit of banks as a proportion of GDP; “REG” is a vector One of the important limitations pointed out by micro-stud-
of regional dummies with Latin America and Caribbean being ies is that microfinance or microcredit does not necessarily
the reference region; Eqn. (2) is the reduced form which tests reach the poorest of the poor (e.g., Morduch, 1999). To fur-
the presence of endogeneity and suitability of our instruments. ther investigate this from the macro perspective, we examine
“enfcont” represents cost of enforcing contracts at the country the effects of gross loan portfolio per capita on poverty gap
level and “lag5yrsGLP” is the weighted 5-year average lag of (which measures depth of poverty) and squared poverty gap
gross loan portfolio (which is weighted by the number of MFIs (which measures severity of poverty).

East Asian and Pacific Eastern Europe and Central Asia Latin America and the Caribbean
3500000 7000000
4000000

3000000
6000000
3000000
2500000
5000000
2000000
2000000
4000000
1500000

Sub- 1000000 3000000

2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009

Middle East and North Africa South Asia Sub-Saharan Africa

14000000 8000000
4000000
12000000 6000000

10000000 3000000
4000000
8000000
2000000 2000000
6000000
0
4000000 2005 2006 2007 2008 2009 1000000
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Year

Figure 1. Trends and Patterns of Real Gross Loan Portfolio. Source: Authors’ compilation from MIX Data.
1678 WORLD DEVELOPMENT

Table 1. Descriptive statistics of poverty headcount correlates

Regions Poverty Poverty gap Squared Gross loan No. of MFIs Domestic Gross domestic
headcount poverty gap per capita credit product per capita
2003 2007 2003 2007 2003 2007 2003 2007 2003 2007 2003 2007 2003 2007
EAP No. 3 4 3 4 3 4 4 5 4 5 5 5 5 5
Mean 37.46 24.29 10.66 5.83 115.7 37.13 5.1 12.11 10.5 16.8 53.61 57.64 652.33 880.63
Median 40.05 24.12 11.2 5.34 125.44 28.7 6.29 0.03 8 15 49.2 40.6 473.42 617.12
ECA No. 19 17 19 17 19 17 19 20 19 20 18 19 19 19
Mean 11.13 5.97 2.98 1.51 24.05 5.55 10.43 56.32 7.63 11.5 26.15 37.67 1693.21 2212.38
Median 3.09 2 0.66 0.5 0.44 0.25 3.9 24.09 7 7.5 25.16 35.02 1389.97 1945.64
LAC No. 15 14 15 14 15 14 14 15 14 15 15 15 15 15
Mean 14.48 8.85 5.8 3.04 74.63 14.57 7.76 40.94 10.14 21.2 47.78 48.86 2638.87 3110.35
Median 13.73 7.97 4.77 2.54 22.75 6.55 5.55 24.36 6.5 16 39.98 45.25 2324.45 2692.17
MENA No. 2 2 2 2 2 2 2 3 2 3 2 2 3 2
Mean 2 2 0.5 0.5 0.25 0.25 4.54 6.14 5.5 7.33 98.18 102.27 1284.7 2033.5
Median 2 2 0.5 0.5 0.25 0.25 4.54 1.54 5.5 7 98.18 102.27 1469.94 2033.5
SA No. 2 3 2 3 2 3 5 5 5 5 4 5 4 4
Mean 35.88 48.8 9.98 14.54 153.48 225.62 1.98 2.71 23 32 47.3 43.38 508.01 628.02
Median 35.88 49.64 9.98 13.08 153.48 171.09 0.9 0.46 14 31 45.52 49.19 439.51 563.47
SSA No. 16 8 16 8 16 8 19 21 19 21 22 18 22 21
Mean 57.88 50.69 24.54 20.28 730.8 508.21 2.34 5.1 6.89 8 26.52 24.75 515.21 548.2
Median 56.95 55.38 21.48 22.21 463.01 502.89 0.69 2.38 7 8 16.03 11.88 290.89 342.18
Total No. 57 48 57 48 57 48 63 69 63 69 66 64 68 66
Mean 27.07 18.3 10.34 6.21 244.28 108.12 6.2 28.12 9.3 14.23 36.73 40.69 1356.42 1684.62
Median 16.07 9.02 6.3 2.99 39.69 8.92 2.02 8.41 7 10 30.66 36.21 821.24 1081.74
Source: Authors’ compilation from MIX and WDI datasets.

Table 2. Results based on cross-sectional regressions (dependent variable: poverty headcount ratio)
Explanatory variables OLS IV
Without Regions With regions Without Regions With regions
(1) (2) (3) (4)
Log of GLP per capita 3.00 1.40 3.80 3.25
[4.04]** [1.70]  [2.58]** [2.31]*
Log of GDP per capita 12.83 7.30 12.12 9.02
[8.33]** [4.01]** [6.63]** [4.46]**
Domestic credit 0.09 0.08 0.11 0.11
[1.65] [1.77]  [1.62] [1.87] 
MENA – 7.44 – 9.54
– [1.90]  – [1.69] 
EAP – 3.53 – 4.46
– [0.69] – [0.55]
ECA – 8.85 – 11.38
– [3.49]** – [4.01]**
SA – 20.94 – 10.31
– [3.34]** – [1.21]
SSA – 20.12 – 9.67
– [1.83]  – [0.91]
Constant 119.58 75.48 117.44 96.81
[10.20]** [4.40]** [10.31]** [4.77]**
N 47 47 46 46
Adj. R2 0.728 0.864 0.717 0.835
F-statistic 33.50 195.24 30.59 104.70
Under identification test – – 7.65(0.02) 6.72(0.00)
Weak identification test – – 10.63(0.00) 11.76(0.00)
Over identification test – – 1.13(0.28) 0.51(0.48)
Hausman test – – 0.69(0.87) 4.98(0.76)
t-values are in parenthesis.
*
Significant at 5%.
**
Significant at 1%.
 
Significant at 10%.
 MICROFINANCE AND POVERTY—A MACRO PERSPECTIVE 1679

Table 3. Results based on panel data regressions (dependent variable: poverty head count ratio)
Explanatory variables Pool OLS Fixed effect Random effectsh Random effectst
(1) (2) (3) (4)
Log of GLP per capita 1.31 0.37 0.91 1.59
[2.53]* [0.44] [1.76]  [3.35]**
Log of GDP per capita 9.43 13.02 16.93 10.17
[5.45]** [1.96]  [8.89]** [7.64]**
Domestic Credit 0.07 0.01 0.00 0.08
[2.40]* [0.08] [0.09] [1.95] 
2007 Year Dummy 1.28 – – –
[0.64] – – –
MENA 10.25 – – –
[3.22]** – – –
EAP 3.74 – – –
[0.78] – – –
ECA 10.96 – – –
[5.32]** – – –
SA 14.19 – – –
[1.75]  – – –
SSA 22.56 – – –
[3.73]** – –
Constant 92.16 113.73 143.53 100.58
[6.67]** [2.55]* [11.67]** [10.53]**
Hausman – – 13.94(0.00) 43.60(0.00)
Theta – – 0.76 0.84
N 99 99 99 99
Adj. R2 0.851 0.996 – –
F-statistic 51.81 4.37 – –
t-values are in parenthesis.
*
Significant at 5%.
**
Significant at 1%.
 
Significant at 10%.
H
Country effect.
t
Regional effect.

4. RESULTS Table 1 provides a summary statistics of the variables

Figures 1 and 2 describe the patterns and trends in size and
outreach of the microfinance industry using real gross loan
portfolio (after adjusting for inflation), number of MFIs and
active borrowers. Figure 1 shows the trend and patterns of real
gross loan portfolio for different regions. Overall, the com-
pound growth rate of the median gross loan portfolio in-
creases for all regions over the period 2005–09. However,
there are variations (steep and gentle) in the year-by-year up-
ward slopes, while in one instance (Eastern Europe and Cen-
tral Asia), a downward trend is observed. In particular, the
slope for 2007–08 is either gently increasing or sloping down-
wards. An interpretation of the trend over this period will need
to take cognizance of the potential adverse effect of the global
financial crisis on the microfinance industry. Until 2007, the
largest MFIs were located in Latin America and the Carib-
bean (LAC). However, in 2008, MFIs in Middle East and
North Africa (MENA) experienced a sharp increase in their
gross loan portfolio.
Figure 2 compares the patterns and trends of gross loan
portfolio of different regions and shows that over the years
South Asia has experienced a greater and sharp increase in
the number of active borrowers than other regions. First, it
might be argued that by virtue of population size of countries
in this region, MFIs may have reached out to more clients
(scale of outreach). Second, the MFIs in South Asia (e.g., Ban-
gladesh or India) might have placed more emphasis on in-
crease in the scale of outreach (e.g., in terms of number of
clients) or poverty reduction as their central mission than
those in other regions.
used in the regression analyses. In view of the heterogeneity
of the size of MFIs (gross loan portfolio), outreach (number
of active borrowers), and a country’s output per head
(GDPPC), it is always prudent to observe the dispersion
of the data. Table 1 indicates that the median in some in-
stances is about either a hundredth (East Asia and the Pa-
cific (EAP)) or a tenth (MENA) of the mean. This suggests
that the raw data for the mean are likely to be affected by
extreme values.
From the perspective of both numbers of active borrowers
and MFIs, microfinance activities in SA countries are more in-
tense than in the other regions. At the lower end, MFI activ-
ities in Sub-Saharan Africa (SSA) countries tend to show the
lowest values for the number of active borrowers (as a proxy
for MFI operations). As observed from the trends (Figures 1
and 2), variations in these indicators over time and across dif-
ferent regions suggest the need to develop a meaningful index
that pulls together all three variables.
In terms of the macro indicators, SSA is the poorest region
for both periods irrespective of the measure (incidence, depth,
and severity) in question. Over the period 2003–07, both the
poverty headcount and poverty gap showed a decline of about
7 and 4 percentage points, respectively. 13 South Asia is an
exception as our sample showed that poverty levels rose in
the region over this period. 14 Among the less “worse off”
regions, 15 MENA recorded the lowest poverty headcount ra-
tio while LAC showed the highest output per head (GDPPC)
in both years. The poverty headcount ratio continued to be
low (2%) in MENA, while it substantially decreased from
14.5% to 8.9% in LAC.
1680 WORLD DEVELOPMENT

Table 4. Results based on cross-sectional regressions (dependent variable: poverty gap)

Explanatory variables OLS IV
Without regions With regions Without regions With regions
(1) (2) (3) (4)
Log of GLP per capita 1.32 0.87 2.34 2.08
[3.07]** [2.08]* [2.69]** [2.45]*
Log of GDP per capita 4.42 2.56 3.56 3.59
[5.76]** [2.87]** [3.43]** [3.58]**
Domestic credit 0.06 0.04 0.09 0.07
[2.31]* [1.69]  [2.30]* [1.77] 
MENA – 2.53 – 3.84
– [1.23] – [1.19]
EAP – 2.40 – 7.49
– [0.95] – [1.53]
ECA – 4.07 – 5.58
– [3.48]** – [3.87]**
SA – 3.41 – 3.35
– [1.09] – [0.74]
SSA – 8.41 – 1.81
– [1.52] – [0.32]
Constant 43.08 28.46 40.61 41.67
[7.12]** [3.50]** [6.94]** [4.16]**
N 47 47 46 46
Adj. R2 0.627 0.767 0.557 0.698
F-statistic 16.53 21.80 17.12 28.11
Under identification test – – 7.65(0.02) 6.72(0.00)
Weak identification test – – 10.63(0.00) 11.76(0.00)
Over identification test – – 0.11(0.74) 0.25(0.62)
Hausman test – – 3.51(0.32) 6.11(0.63)
t-values are in parenthesis.
*
Significant at 5%.
**
Significant at 1%.
 
Significant at 10%.

The results of multivariate regressions are given in Tables 2–
7 and simulation outcomes in Table 8. With a view to examin-
ing the hypothesis of a relationship between gross loan portfo-
lio per capita and poverty (incidence, depth and severity),
eight different cases (i.e., four for cross-sectional regressions
and four for panel data regression) are examined for each pov-
erty measure. Four different cases using cross-sectional data
for 2007 are given in Tables 2, 4 and 6 and other four cases
are given in Tables 3, 5 and 7, using two-period (2003 and
2007) panel data. In Tables 2, 4 and 6, OLS is applied in col-
umns (1) and (2) and IV in columns (3) and (4). The estima-
tions in columns (1) and (2) are robust (corrected for
heteroscedasticity), and examine cases either using GLP per
capita with and without regional dummies. In a similar fash-
ion, the IV (columns (3) and (4) of Tables 2, 4 and 6) and panel
(Tables 3, 5 and 7), respectively, test the poverty reducing ef-
fect of GLP per capita hypothesis.
Three measures of the FGT class of poverty indices are
used. Thus, Tables 2 and 3 contain all the estimations (OLS,
IV, Fixed Effects (FE), and Random Effects (RE)) for the pov-
erty headcount ratio; Tables 4 and 5 examine the case for the
poverty gap (depth) and Tables 6 and 7 investigate the severity
of poverty (squared gap).
In column (1) of Table 2, all three specifications using the
cross-sectional data show that GLP per capita is negatively
and significantly associated with the poverty headcount ratio,
which is consistent with our hypothesis that micro loans re-
duce poverty. For instance, because MFI loan per capita is de-
fined in log, we observe that a 10% increase in MFI loan per
capita reduces poverty by about 0.325% in the case of the
IV estimation (in column (4) of Table 2). 16 The coefficient esti-
mate of log of gross loan portfolio per capita of MFI is nega-
tive and significant at the 5% level in this case. As expected,
GDP per capita is negative and shows a 1% statistical signifi-
cance irrespective of the specification or the estimation method
chosen. Furthermore, consistent with the finance-poverty liter-
ature, we find that the coefficient estimate of share of domestic
credit to GDP is negative and significant in some cases (col-
umns (2) and (4) of Table 2).
Columns (2) and (4) explore the potential effect of regional
dummies on incidence of poverty. We observe that loan per
capita of MFIs remain statistically significant after the inclu-
sion of the regional dummies. Inclusion of regional dummies
in the poverty headcount equation reveals that ECA, with
LAC as the reference case, has a significant negative coefficient
(at the 1% level in both the OLS and IV cases). Also, SA and
SSA dummies are positive in the OLS estimation. This implies
that SA and SSA have higher poverty headcount levels relative
to LAC. These regression results are consistent with the sum-
mary statistics of Table 1 in which both poverty levels and
GDPPC show that SA and SSA trail LAC.
Columns (3) and (4) present the IV estimation with the aim
of resolving the potential endogeneity of microfinance vari-
ables in the poverty headcount equation, that is, gross loan
portfolio per capita. As discussed earlier, the endogeneity
may be due to a bi-causal relationship between poverty and
gross loan portfolio per capita. In terms of a bi-causal rela-
tionship between gross loan portfolio per capita and poverty
headcount, we allude to the fact that investors who are in-
clined to poverty reduction might direct their financial re-
sources to countries and regions where poverty is high.
Appendices 2 and 3 show the correlation matrix and the first
 MICROFINANCE AND POVERTY—A MACRO PERSPECTIVE 1681

Table 5. Results based on panel data regressions dependent variable: poverty gap
Explanatory variables Pool OLS Fixed effect Random effectsh Random effectst
(1) (2) (3) (4)
Log of GLP per capita 0.85 0.04 0.35 0.96
[2.86]** [0.09] [1.23] [3.42]**
Log of GDP per capita 3.22 5.03 6.70 3.52
[3.20]** [1.41] [6.37]** [4.50]**
Domestic credit 0.05 0.01 0.01 0.06
[2.74]** [0.20] [0.37] [2.47]*
2007 year dummy 0.42 – – –
[0.40] – – –
MENA 3.08 – – –
[1.62] – – –
EAP 1.85 – – –
[0.67] – – –
ECA 5.53 – – –
[4.51]** – – –
SA 1.42 – – –
[0.41] – – –
SSA 10.41 – – –
[2.88]** – – –
Constant 34.31 43.19 56.95 36.83
[4.23]** [1.80]  [8.37]** [6.68]**
Hausman – – 18.12(0.00) 139.98(0.00)
Theta – – 0.76 0.82
N 99 99 99 99
Adj. R2 0.741 1.381 – –
F-statistic 19.54 1.72 – –
t-values are in parenthesis.
*
Significant at 5%.
**
Significant at 1%.
 
Significant at 10%.
H
Country effect.
t
Regional effect.

stage IV estimation which offer a justification for the validity
of our instruments.
We use two kinds of instrument, that is, cost of enforcing
contract and weighted 5-year lag of average GLP. The former
is intuitively justified on the ground that the decision of micro-
finance commercial investors, especially international funders,
on whether to invest in a particular country is likely to depend
on the extent to which the country has a good institution (e.g.,
represented by a low cost of enforcing contracts) that would
facilitate economic activities. In this context, the cost of
enforcing contracts is supposed to have a significant and neg-
ative correlation with loan per capita of MFIs (see Appendix
2). While a direct effect of the cost of enforcing contracts on
poverty might not be strong as most poor households operate
in the informal sector, the higher enforcing costs may exclude
the poor from the formal sector employment or credit and per-
petuate poverty in the long run. In view of this, we also use
weighted 5-year lag of average GLP as an additional instru-
ment.
It is worth mentioning that we observe a poverty reducing
effect for MFIs’ gross loan per capita when we use only the
cost of enforcing contracts as an instrument. However, since
the weak identification test is significant at only 10% in this
case, we find the need to augment the instrumentation. Using
both instruments yields a much higher Kleibergen-Paap rk
Wald F-statistic (weak identification test), as shown in col-
umns 3 and 4 of Table 2. This does not compromise the Sar-
gan’s over-identification test as we fail to reject the null
hypothesis that the instruments are valid, that is, uncorrelated
with the error term. Also, the p-values (0.02 and 0.00) of the
under identification test in columns (3) and (4) of Table 2 al-
low us to reject the null hypothesis that the model is under
identified. These specification tests validate IV estimations. 17
Tables 3, 5 and 7 show the results based on panel estima-
tions for the poverty headcount ratio, depth, and severity,
respectively. In Table 3, the poverty headcount ratio is esti-
mated by the same set of explanatory variables. The number
of observation is 99. It is noted that this estimation is based
on unbalanced panel data and thus the results have to be inter-
preted with caution (see Appendix 4 for the list of countries
and frequencies of observations). A similar pattern of results
is observed, that is, gross loan portfolio per capita of microfi-
nance institutions is negatively associated with incidence of
poverty, after controlling for the effects of other covariates
and unobserved heterogeneity.
In Tables 4 and 5, we have replicated both the cross-sec-
tional and panel regressions by replacing the poverty head-
count ratio with the poverty gap. To avoid cluttering the
text, we summarize the key findings. All four cases in Table
4 show significant negative effects of log of gross loan portfolio
per capita of MFIs, implying the potential of microfinance in
reducing the depth of poverty. The other explanatory variables
show expected signs too. This hypothesis is further corrobo-
rated by the pooled OLS and random effects model in columns
(1) and (4) of Table 5. Loan per borrower shows a statistically
significant negative effect. Both the Hausman and theta statis-
tics favor random effects over fixed effects.
Tables 6 and 7 report the cases where the dependent variable
is squared poverty gap. An examination of the poverty gap
and squared poverty gap results shows consistent results in
1682 WORLD DEVELOPMENT

Table 6. Results based on cross-sectional regressions (dependent variable: squared poverty gap)
Explanatory variables OLS IV
Without regions With regions Without regions With regions
(1) (2) (3) (4)
Log of GLP per capita 42.48 33.03 89.49 76.74
[2.63]* [2.04]* [2.51]* [2.22]*
Log of GDP per capita 97.31 48.22 58.69 83.16
[3.50]** [1.50] [1.49] [2.17]*
Domestic credit 2.41 1.55 3.88 2.30
[2.41]* [1.53] [2.28]* [1.63]
MENA – 5.93 – 51.60
– [0.09] – [0.45]
EAP – 120.59 – 301.59
– [1.31] – [1.56]
ECA – 75.96 – 127.49
– [2.20]* – [2.53]*
SA – 5.00 – 244.60
– [0.05] – [1.35]
SSA – 288.95 – 55.60
– [1.41] – [0.26]
Constant 997.99 584.47 888.65 1044.34
[4.31]** [2.00]  [4.01]** [2.66]**
N 47 47 46 46
Adj. R2 0.486 0.619 0.326 0.521
F-statistic 6.54 6.21 7.21 8.02
Under identification test – – 7.65(0.02) 6.72(0.00)
Weak identification test – – 10.63(0.00) 11.76(0.00)
Over identification test – – 0.00(0.95) 0.29(0.59)
Hausman test – – 5.22(0.16) 5.65(0.69)
t-values are in parenthesis.
*
Significant at 5%.
**
Significant at 1%.
 
Significant at 10%.

terms of sign and significance for GLP per capita. Also, in the
case of squared poverty gap, the Hausman test favors random
effects. 18 Broadly, the results imply that GLP per capita of
MFIs benefits not just the poor but also the poorest. In
sum, gross loan portfolio per capita of MFIs is negatively
associated with the incidence, depth, and severity of poverty.
5. SIMULATIONS
That microfinance is impervious to the global recession fol-
lowing the financial crisis is debatable. 19 Some have argued
that the slowdown of the global economy will impact nega-
tively on microfinance as MFIs are now more closely linked
to global financial markets than before. So there will be: (i)
a funding or liquidity impact, with greater refinancing risks
for MFIs and (ii) an economic impact, with financial perfor-
mance affected by lower lending volumes, higher costs of fund-
ing, tighter net interest margins, and greater volatility in
foreign exchange losses/gains. Magnoni and Powers (2009),
for example, point out that, over 2009–10, the sector-wide
microfinance will grow by some $28 billion less than antici-
pated before the crisis. Others are more optimistic. For exam-
ple, Littlefield and Kneiding (2009) argue that the
microfinance sector will survive the setbacks because of the
strong foundations and vast untapped market of creditworthy
clients. The effects on the poor through MFIs are, however,
largely anecdotal. An attempt is made below to simulate the
likely effects of the global recession.
In the context of the recent global recession, we examine the
possible slowdown of poverty reduction 20 as a result of con-
traction: (i) in gross loan portfolio per capita of MFIs and
(ii) GDP per capita. Table 8 reports the simulation results
on the basis of the IV estimation reported in column (4) of Ta-
ble 2. The calculations 21 are premised on the assumption that
the coefficient estimate of each variable is the same across dif-
ferent regions in the regression and thus the simulated effects
of key variables on poverty are also the same. The third and
fourth rows of Table 8 show that a fall in GLP per capita of
MFIs and GDP per capita will tend to increase poverty head-
count. While this is plausible in view of the comparative con-
tribution of MFI in an economy, the poverty increasing effect
of 0.167% (or 0.343%) due to the 5% (or 10%) decline in GLP
per capita points to the need for sustainable flow of on-lending
funds. Although the overall rise in poverty is low, it must be
emphasized that this is additional to other cumulative effects
of the global slowdown on poverty (investments, for example,
continue to be sluggish).
6. CONCLUDING OBSERVATIONS
Recent assessments of impact of microfinance—based lar-
gely on randomized trials—have led to questioning of claims
of women’s empowerment and poverty reduction. The so-
called “magic” of microfinance has thus come under deep
scrutiny and the findings of little or weak impacts are begin-
ning to turn the tide against it. The faltering global economy
has also raised serious concerns about the immunity of the
microfinance sector and its potential for poverty reduction.
From this perspective, the preceding analysis centered on the
hypothesis that microfinance reduces poverty. We carried
 MICROFINANCE AND POVERTY—A MACRO PERSPECTIVE 1683

Table 7. Results based on panel data regressions (dependent variable: squared poverty gap)
Explanatory variables Pool OLS Fixed effect Random effectsh Random effectst
(1) (2) (3) (4)
Log of GLP per capita 35.68 10.47 11.18 39.13
[2.80]** [0.47] [0.83] [2.89]**
Log of GDP per capita 56.62 165.80 189.12 69.82
[1.53] [0.94] [4.03]** [1.86] 
Domestic credit 2.73 0.59 1.02 2.89
[2.72]** [0.28] [0.78] [2.55]*
2007 year dummy 8.93 – – –
[0.19] – – –
MENA 36.98 – – –
[0.48] – – –
EAP 83.00 – – –
[0.78] – – –
ECA 128.15 – – –
[2.83]** – – –
SA 8.98 – – –
[0.08] – – –
SSA 420.29 – – –
[2.79]** – – –
Constant 707.54 1306.96 1595.16 849.04
[2.37]* [1.10] [5.28]** [3.29]**
Hausman – – 17.07(0.00) 527.43(0.00)
Theta – – 0.73 0.77
N 99 99 99 99
Adj. R2 0.538 1.648 – –
F-statistic 6.75 0.33 – –
t-values are in parenthesis.
*
Significant at 5%.
**
Significant at 1%.
 
Significant at 10%.
H
Country effect.
t
Regional effect.

Table 8. Effect of decrease in GLP per capita, GDP per capita and domestic credit on poverty
Coefficients Means 5% 10%
(1) (2) (3) (4)
Effect of decrease in GLP per capita on poverty 3.252 2.060 0.167 0.343
Effect of decrease in GDP per capita on poverty 9.018 7.095 0.463 0.950
Net effect 0.523 1.192
All developing countries Mean poverty 18.400 18.400
Final poverty 18.923 19.592
East Asia and the Pacific Mean poverty 24.293 24.293
Final poverty 24.816 25.485
Eastern Europe and Central Asia Mean poverty 5.969 5.969
Final poverty 6.492 7.161
Latin America and the Caribbean Mean poverty 8.846 8.846
Final poverty 9.369 10.038
Middle east and North Africa Mean poverty 2.000 2.000
Final poverty 2.523 3.192
South Asia Mean poverty 48.801 48.801
Final poverty 49.324 49.993
Sub-Saharan Africa Mean poverty 50.685 50.685
Final poverty 51.208 51.877

out tests using cross-country data for 2007 and a panel for loans per capita are significantly and negatively associated
2003 and 2007. Taking account of the endogeneity associated with poverty, that is, a country with a higher MFIs’ gross loan
with loans per capita from Microfinance Institutions (MFIs), portfolio per capita tends to have lower poverty after control-
our econometric results consistently confirm that microfinance ling for the effects of other factors influencing it. The negative
1684 WORLD DEVELOPMENT
relationship remains unchanged when the poverty headcount
ratio is replaced by the poverty gap and squared poverty
gap. These results suggest that microfinance not only reduces
the incidence of poverty but also its depth and severity. The
panel results further corroborate these findings. Other factors
that contribute to poverty reduction include GDP per capita
and share of credit in GDP (as a measure of financial develop-
ment of an economy). Besides, there are significant regional
effects.
Our simulations point to worsening of poverty in a mild
recession scenario with small reductions in gross loan portfolio
NOTES
1. Some have even questioned the impact in terms of poverty reduction,
promotion of gender equality, and reduction in child mortality. Indeed a
view that microfinance is oversold is gaining credibility (Rosenberg, 2010).
2. The Foster–Greer–Thorbecke (FGT) class of poverty indices is a
generalized measure of poverty a in an economy (e.g., a country) and it is
P
denoted as pa ¼ 1n qi¼1 zy z
i
where z is the poverty line (e.g., reflecting
nutritional requirement), yi is the ith lowest income, n is the population in
the economy, and as q is the number of people whose income is below z,
and a is a measure of poverty aversion where a larger a gives greater
emphasis to the poorest of the poor (Foster, Greer, & Thorbecke 1984).
This comprises the headcount ratio when a = 0 (the fraction of the
population which lives below the poverty line), the average income poverty
gap when a = 1 (the population average of the distances between poor
people’s income and the poverty line or the extent to which a poor falls
below the poverty line on average) and the squared poverty gap (P2) index
when a = 2 (a distributionally sensitive poverty index as a weighted sum
of poverty gaps where the weights are the proportionate poverty gaps)
(Foster et al., 1984). The present study focuses on all three poverty indices.
3. See Appendix 1 for the list of the countries.
4. Appendix 4 lists the countries included in the panel data estimations.
Because we include the countries only with data in 2003, the panel covers a
larger number of countries.
5. Cull et al. (2007) did not provide any direct evidence for this. Their
claim was based on Honohan (2004) who used the data on MFIs provided
by the Microcredit Summit Organization similar to the MIX data and
found that “the largest 30 microfinance firms account . . . for more than
90% of the clients served worldwide by the 234 top firms (and hence for
more than three-quarters of those served by all of the 2572 firms reporting
to the MicrocreditSummit)” (Honohan, 2004, p. 4). Cull et al. then argued
that “Honohan’s evidence suggests that . . . the banks here (covered by the
MIX data) served over half of all microfinance customers worldwide”
(Cull et al., 2007, p. F111, the phrase in brackets added by authors).
6. For instance, the correlation coefficient between loan accounts per
adult and aggregated gross loan portfolio per capita is 0.483 and
statistically significant for 2009. This does not change much when we
exclude the outliers, such as Bangladesh.
7. Exceptions include Imai et al. (2010a, 2010b).
8. See Table 1 for descriptive statistics of these variables. These will be
discussed in Section 4.
9. MIX data date back to 1994, but not until 2002 most MFIs were not
keen on submitting their records for public use.
per capita, GDP per capita, and share of credit in GDP. These
simulations are helpful in adding precision to anecdotal evi-
dence about how setbacks to MFIs hurt the poor. Indeed, sus-
tained flows to MFIs may help avert to some extent
accentuation of poverty as a consequence of the slow and fal-
tering recovery of the global economy.
In conclusion, assertions that microfinance is “oversold”
and lacks the “magic” associated with it are widely off the
mark, if not largely mistaken.
10. This is because the construction of international poverty estimates
has to rely on nation-wide household expenditure or income surveys which
are carried out once or twice in a decade for most of the developing
countries.
11. This index passes the statistical validity of a valid instrument as it
shows a high correlation with gross loan portfolio and a low correlation
with the poverty headcount ratio (with the coefficient of correlation being
0.8 for the former and 0.1 for the latter, respectively).
12. Due to data constraints on the international poverty data, we took
averages of poverty for the period 2000–03 and 2004–07.
13. Poverty data for the panel were constructed by taking averages for
2000–03 and 2004–07. The data are given in Appendix 5.
14. It is noted that an overall increase in poverty in South Asia is due to
the highly unbalanced nature of our panel data of poverty. As shown in
Appendix 5, while Bangladesh has two observations, India, Nepal, and Sri
Lanka have only one either for 2003 or 2007. Despite the fall in poverty
headcount for Bangladesh from 57.8% in 2003 to 49.6% in 2007, including
countries with high poverty (e.g., Nepal—55.1%) in 2007 accounts for the
higher figure in 2007.
15. Most of the countries used in the study are either transitional or
developing countries.
16. This is based on the formulae to interpret the coefficient of semi-log
specification (level-log): DY = (b/100)%DX (Wooldridge, 2009, p.46).
Note that poverty headcount ratio is defined in percentages.
17. The relationship between GLP per capita and poverty head count
ratio may be different according to the countries’ income level. We have
repeated the same regressions (OLS and IV) for three income groups of
countries, that is, “low income,” “lower middle income,” and “upper
middle income.” Appendix 6 shows the results of IV. It is observed that
the negative association between GLP per capita and poverty is the largest
and most highly significant for low income countries and becomes smaller
and statistically insignificant as the income goes up, while it is significant
in case of middle income countries as a whole. A similar pattern of results
is observed in case of OLS and for other measures of poverty.
18. In addition to the Hausman test, we calculate theta (measure of the
extent of biasedness of random effects’ model) and we observe values close
to one (greater than 0.75) for each of three estimations. This supports the
fact that country/regional effects over time are important and cannot be
ignored. Use of theta, which is preferred due to the strong finite
assumption underlying the Hausman test, further supports our choice of
fixed effects model.
 MICROFINANCE AND POVERTY—A MACRO PERSPECTIVE 1685

19. For a comprehensive review, see Llanto and Badiola (2010). 21. The simulated effects of GLP per capita and GDPPC are calculated
with the semi-log (or “level-log”) specification (DY = (b/100)%DX), while
20. Imai et al. (2010a, 2010b) report a slowdown in the rate of poverty the effect of domestic credit is based on the “level-level” specification
reduction post 2000 relative to the 1990-decade. (DY = bDX) (see Wooldridge, 2009, p. 46 for details).

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APPENDIX 1. LIST OF REGIONS AND COUNTRIES

Low income countries Lower middle income Upper middle income countries High income
countries countries
Country Region Country Region Country Region Country Region
a
Afghanistan SA Armenia ECA Albania ECA Poland ECA
Bangladesh SA Cameroon SSA Azerbaijan ECA Croatia ECA
Benin SSAb Congo, Rep. SSA Bosnia and Herzegovina ECA
Burkina Faso SSA Egypt, Arab Rep. MENAf Brazil LAC
Cambodia EAPc El Salvador LAC Bulgaria ECA
Congo, Dem. Rep. of SSA Georgia ECA Chile LAC
Ethiopia SSA Ghana SSA China EAP
Gambia, The SSA Guatemala LAC Colombia LAC
Guinea SSA Honduras LAV Costa Rica LAC
Guinea-Bissau SSA India SA Dominican Republic LAC
Haiti LACd Indonesia EAP Ecuador LAC
Kenya SSA Iraq MENA Jordan MENA
(continued on next page)
1686 WORLD DEVELOPMENT

APPENDIX 1—Continued
Low income countries Lower middle income countries Upper middle income countries High income
countries
Country Region Country Region Country Region Country Region
e
Kyrgyz Republic ECA Kosovo ECA Kazakhstan ECA
Madagascar SSA Lao P.D.R. EAP Macedonia, FYR ECA
Malawi SSA Moldova ECA Mexico LAC
Mozambique SSA Mongolia ECA Panama LAC
Nepal SA Nicaragua LAC Peru LAC
Rwanda SSA Papua New Guinea SSA Romania ECA
Sierra Leone SSA Paraguay LAC Russia ECA
Tajikistan ECA Sri Lanka SA South Africa SSA
Tanzania SSA Swaziland SSA Turkey ECA
Uganda SSA Ukraine ECA
Uzbekistan ECA
Vietnam EAP
Zambia SSA
a
SA: South Asia.
b
SSA: Sub-Saharan Africa.
c
EAP: East Asia and Pacific.
d
LAC: Latin America and the Caribbean.
e
ECA: Eastern Europe and Central Asia.
f
MENA: Middle East and North Africa.

APPENDIX 2. CORRELATION MATRIX

Variables Poverty Poverty Squared Log of GLP Log of GDP Domestic Cost of Log
headcount gap poverty gap per capita per capita credit cont. enf. W. GLP
Poverty headcount 1
Poverty gap 0.96** 1
Squared poverty gap 0.86** 0.95** 1
Log of GLP per capita 0.43** 0.41** 0.40** 1
Log of GDP per capita 0.80** 0.73** 0.60** 0.30* 1
Domestic credit 0.36* 0.36* 0.36* 0.07 0.49** 1
Cost of contract enforcement 0.55** 0.55** 0.53** 0.28* 0.44** 0.32* 1
Log. W. GLP 0.17 0.28  0.36* 0.60** 0.30* 0.16 0.13 1
W.—weighted 5-year lag average.
*
Significant at 5%.
**
Significant at 1%.
 
Significant at 10%.

APPENDIX 3. FIRST STAGE REGRESSION (DEPENDENT VARIABLE: LOG OF GLP PER CAPITA)

Explanatory variables Coefficients

Cost of contract enforcement 0.02
[2.01] 
Log of weighted 5-year lag of average GLP 0.58
[4.23]**
Log of GDP per capita 0.80
[2.33]*
Domestic credit 0.01
[1.14]
MENA 0.77
[0.62]
EAP 3.61
[3.54]**
ECA 0.59
[0.97]
SA 5.37
[4.71]**
 MICROFINANCE AND POVERTY—A MACRO PERSPECTIVE 1687

APPENDIX 3—Continued
Explanatory variables Coefficients
SSA 3.42
[3.07]**
Constant 0.17
[0.04]
N 46
Adjusted R2 0.620
F-statistic 9.15
Log-likelihood 76.30
t-values are in parenthesis.
*
Significant at 5%.
**
Significant at 1%.
 
Significant at 10%.

APPENDIX 4. LIST OF COUNTRIES FOR PANEL DATA

No. Countries Freq. No. Countries Freq.

1 Albania 2 32 Kazakhstan 2
2 Armenia 2 33 Kenya 1
3 Azerbaijan 2 34 Kyrgyz Republic 2
4 Bangladesh 2 35 Macedonia, FYR 2
5 Benin 1 36 Madagascar 2
6 Bosnia and Herzegovina 2 37 Malawi 1
7 Brazil 2 38 Mexico 2
8 Bulgaria 1 39 Moldova 2
9 Burkina Faso 1 40 Mongolia 2
10 Cambodia 1 41 Mozambique 1
11 Cameroon 1 42 Nepal 1
12 Chile 2 43 Nicaragua 2
13 China 2 44 Panama 1
14 Colombia 2 45 Paraguay 2
15 Congo, Dem. Rep. of 1 46 Peru 2
16 Costa Rica 2 47 Poland 2
17 Croatia 2 48 Romania 2
18 Dominican Republic 2 49 Russia 2
19 East Timor 1 50 Rwanda 1
20 Ecuador 2 51 Sierra Leone 1
21 Egypt, Arab Rep. 2 52 South Africa 1
22 El Salvador 2 53 Sri Lanka 1
23 Ethiopia 2 54 Swaziland 1
24 Georgia 2 55 Tajikistan 2
25 Guatemala 2 56 Tanzania 1
26 Guinea 1 57 Turkey 2
27 Haiti 1 58 Uganda 2
28 Honduras 2 59 Ukraine 2
29 India 1 60 Vietnam 2
30 Indonesia 1 61 Zambia 2
31 Jordan 2
Source: Authors’ compilation from MIX data.

APPENDIX 5. INTERNATIONAL POVERTY DATA—UNBALANCED PANEL

No. Year Countries Poverty HC No. Year Countries Poverty HC

1 2003 Albania 2.00 54 2007 Kenya 19.72
2 2007 Albania 2.00 55 2003 Kyrgyz Republic 34.03
3 2003 Armenia 12.20 56 2007 Kyrgyz Republic 12.62
4 2007 Armenia 3.65 57 2003 Macedonia, FYR 2.31
5 2003 Azerbaijan 6.32 58 2007 Macedonia, FYR 2.00
(continued on next page)
1688 WORLD DEVELOPMENT

APPENDIX 5—Continued
No. Year Countries Poverty HC No. Year Countries Poverty HC
6 2007 Azerbaijan 2.00 59 2003 Madagascar 76.34
7 2003 Bangladesh 57.82 60 2007 Madagascar 67.83
8 2007 Bangladesh 49.64 61 2007 Malawi 73.86
9 2003 Benin 47.33 62 2003 Mexico 4.28
10 2003 Bosnia and Herzegovina 2.00 63 2007 Mexico 2.40
11 2007 Bosnia and Herzegovina 2.00 64 2003 Moldova 25.05
12 2003 Brazil 10.40 65 2007 Moldova 5.26
13 2007 Brazil 8.00 66 2003 Mongolia 15.47
14 2003 Bulgaria 2.32 67 2007 Mongolia 22.38
15 2003 Burkina Faso 56.54 68 2003 Mozambique 74.69
16 2007 Cambodia 33.02 69 2007 Nepal 55.12
17 2003 Cameroon 32.81 70 2003 Nicaragua 19.42
18 2003 Chile 2.00 71 2007 Nicaragua 15.81
19 2007 Chile 2.00 72 2007 Panama 9.34
20 2003 China 28.36 73 2003 Paraguay 17.23
21 2007 China 15.92 74 2007 Paraguay 7.88
22 2003 Colombia 16.07 75 2003 Peru 13.84
23 2007 Colombia 16.01 76 2007 Peru 7.94
24 2007 Congo, Dem. Rep. of 59.22 77 2003 Poland 2.00
25 2003 Costa Rica 4.52 78 2007 Poland 2.00
26 2007 Costa Rica 2.19 79 2003 Romania 3.09
27 2003 Croatia 2.00 80 2007 Romania 2.00
28 2007 Croatia 2.00 81 2003 Russia 2.00
29 2003 Dominican Republic 5.27 82 2007 Russia 2.00
30 2007 Dominican Republic 4.46 83 2003 Rwanda 76.56
31 2003 East Timor 52.94 84 2003 Sierra Leone 53.37
32 2003 Ecuador 10.49 85 2003 South Africa 26.20
33 2007 Ecuador 7.24 86 2003 Sri Lanka 13.95
34 2003 Egypt, Arab Rep. 2.00 87 2003 Swaziland 62.85
35 2007 Egypt, Arab Rep. 2.00 88 2003 Tajikistan 36.25
36 2003 El Salvador 13.73 89 2007 Tajikistan 21.49
37 2007 El Salvador 8.70 90 2003 Tanzania 88.52
38 2003 Ethiopia 55.58 91 2003 Turkey 2.00
39 2007 Ethiopia 39.04 92 2007 Turkey 2.65
40 2003 Georgia 12.80 93 2003 Uganda 57.37
41 2007 Georgia 13.44 94 2007 Uganda 51.53
42 2003 Guatemala 14.99 95 2003 Ukraine 2.00
43 2007 Guatemala 11.70 96 2007 Ukraine 2.00
44 2003 Guinea 70.13 97 2003 Vietnam 40.05
45 54.9 Haiti 54.90 98 2007 Vietnam 22.82
46 2003 Honduras 18.10 99 2003 Zambia 64.60
47 2007 Honduras 20.19 100 2007 Zambia 64.29
48 2003 India 41.64
49 2007 Indonesia 25.42
50 2003 Jordan 2.00
51 2007 Jordan 2.00
52 2003 Kazakhstan 3.42
53 2007 Kazakhstan 2.00
Source: Authors’ compilation based on 2011 world development indicators.

APPENDIX 6. DISAGGREGATION BY INCOME GROUPS (IV) (DEPENDENT VARIABLE: POVERTY HEADCOUNT

RATIO)

Explanatory variables (a) (b) (c) (d)

Low income Lower middle income Upper middle income Middle income (b) + (c)
Log of GLP per capita 10.13 2.13 0.53 2.16
[3.59]** [1.58] [0.79] [2.09]*
Log of GDP per capita 4.45 18.72 1.34 11.09
[0.51] [3.38]** [0.56] [5.22]**
Share of domestic credit of GDP 0.49 0.11 0.07 0.05
[2.41]* [1.03] [1.66]  [0.78]
 MICROFINANCE AND POVERTY—A MACRO PERSPECTIVE 1689

APPENDIX 6—Continued
Explanatory variables (a) (b) (c) (d)
Low income Lower middle income Upper middle income Middle income (b) + (c)
Constant 43.20 158.38 10.69 101.98
[0.99] [4.17]** [0.55] [6.36]**
N 11 15 19 35
Adj. R2 0.705 0.470 . 0.469
F-statistics 5.68 4.70 0.79 10.18
t statistics in brackets.
*
p < .05.
**
p < .01.
 
p < .10