Yes, microlending reduces extreme poverty
A small boost in microlending to the developing world could lift more than 10.5 million people out of extreme poverty. That’s one conclusion of my study, published last month in The B.E. Journal of Macroeconomics, which found that microfinance not only reduces how many households live in poverty but also how poor they are.
Currently, 836 million people – or 12% of the world’s population – experience extreme poverty, living off less than US$1.25 a day. Using data from 106 developing countries from between 1998 and 2013 to examine the efficacy of microlending as a poverty-reduction tool, I found that just a 10% increase in the gross microfinance loan portfolio per client could cut this number by 1.26%.
While the world has seen some progress over the past 15 years in reaching the UN Millennium Development Goals (MDGs), which placed eradicating hunger and poverty on top of the global agenda, extreme poverty remains a pressing challenge. It continues to be a priority in the 2015-2030 Sustainable Development Goals.