Contribution of microfinance to economic growth: Transmission channel and the ways to test it

Since its birth in 1970s microfinance has been growing rapidly with the aim to lift people out of poverty and promote economic growth. Its role and importance has been amplified amidst the global financial crisis when trust into formal banking is shaken. Despite global recognition and popularity of microfinance there is mixed evidence of its net benefits and very limited work on its contribution to financial intermediation and economic growth. This paper first, identifies and discusses possible transmission channels for microfinance and second, establishes the choice of appropriate methodology for robust empirical test. Adapted for panel data the Arellano-Bond (1991) technique allows for the Granger-Causality type test to reveal the direction of causality and overcome endogeneity issue. The main purpose of the estimation is to check whether microfinance matters - matters for financial sector development and economic growth.


Issue Date:
2013
Publication Type:
Journal Article
Record Identifier:
http://ageconsearch.umn.edu/record/245719
PURL Identifier:
http://purl.umn.edu/245719
Published in:
Business and Economic Horizons (BEH), Volume 09, Issue 4
Business and Economic Horizons (BEH)
Page range:
27-43
Total Pages:
17
JEL Codes:
G15; G21; O16; O57




 Record created 2017-04-01, last modified 2018-01-23

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