Microfinance and Poverty Reduction: Evidence from Djibouti

Mohamed Abdallah Ali (1) , Mazhar Mughal (2)

1 CATT - Centre d'Analyse Théorique et de Traitement des données économiques
2 ESC PAU - Ecole Supérieure de Commerce, Pau Business School

Does access to microfinance improve household welfare? We seek the answer to this question using data on 2,060 borrower and non-borrower households based in six major urban centers of Djibouti. We construct a composite index of multi-dimensional poverty and carry out estimations using a number of econometric techniques. Our results show that neither access to micro-credit nor its ostensibly productive use is significantly associated with poverty regardless of the duration of time since the loan was acquired. This holds both for access to, and the amount of micro-credit obtained. The results raise doubts on the effectiveness of Djibouti's microfinance programme.

Keywords: productive loans; Microfinance; Djibouti; poverty

Domains: Quantitative Finance [q-fin]; Economics and Finance

Mohamed Abdallah Ali, Mazhar Mughal. Microfinance and Poverty Reduction: Evidence from Djibouti. 2019. ⟨hal-02282359⟩