Microfinance Works: A Meta-Analysis of its Effect on Poverty Reduction

We performed a meta-analysis to review 17 studies with a total of 53 empirical estimates of the impact of microcredit on poverty. We formulate a hypothesis to examine the empirical evidence and to provide general conclusions about the impact of microfinance among the variations of existing studies. The hypothesis under study is microcredit has a positive impact on poverty. We consider income, consumption and poverty index as a proxy for poverty. The hypothesis testing through calculating the fixed effects weighted average for each primary study reported, examining publication bias using a funnel plot, FAT and PET, and testing a multivariate meta-regression analysis (MRA) on the model of heterogeneity. Overall, we found evidence that microfinance had a significant impact on poverty. However, that effect did not have a strong positive impact. Evidence indicates a positive and significant impact but it hardly provides a major economic impact.