A Panel Analysis of Microfinance's Relevance for Achievement of the Millenium Development Goals. Does Gender Matter?

Abstract

The relationship between women's development and microfinance has received growing attention from economists during the last two decades. Microfinance is often seen as a roadmap for poverty reduction and women's empowerment. United Nations also refer to microfinance as one of the pathways to reach Millenium Development Goals (MDGs) within 2015.

Extensive research has been done to assess the impact of microfinance on several development and welfare indicators at micro level. This paper examines whether microfinance is so substantial that the effects also show up in the aggregate. Using panel data on microfinance from 79 countries covering the period 1995-2008, the impact of microfinance on several development indicators is investigated and microfinance's relevance for achieving MDGs is discussed. In order to do so, a standard fixed-effects approach is utilized to study the impacts on a number of variables e.g. fertility rate, child mortality, life expectancy at birth and children's schooling. The results indicate that microfinance explains 2% of the decrease in fertility, 6% of the increase in life expectancy and 3% of the decrease in child mortality over the entire period. Further, no significant effects on children's schooling are found.

This thesis also evaluates whether lending to women rather than men has additional impact on development indicators. The study could not find any signifcant effect.