DP10484 What Do We Know about Microfinance at Macro Glance?

Author(s): Nargiza Alimukhamedova, Jan Hanousek
Publication Date: March 2015
Keyword(s): development, economic growth, income inequality, Microfinance
JEL(s): C5, G2, O1, O4
Programme Areas: Financial Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10484

The majority of microfinance impact studies focus on finding their effect on a specific group of beneficiaries, in contrast we aim to identify the impact on whole economies (economic growth, and financial sector development and reductions in income inequalities), which is an important policy concern, not previously addressed. To address heterogeneity across countries, we group countries into three broad clusters delineated by a set of macro-institutional determinants. We find long-term evidence of a significant ability of microfinance to affect broader economies. Moreover, the impact and dynamics differ substantially by macro-institutional environment; the microfinance effect is more pronounced in weaker environments.