The effects of microfinance on poverty reduction

Abstract

After many years of civil war, which completely paralyzed the Lebanese economy and demolished the local businesses, it was not before the early 90's that Lebanon started the process of reconstructing the local economy. It has succeeded into fostering one of the most advanced commercial banking sectors in the region. For the poor in need of funds, banks were not the best answer to where they could resolve, thus the microfinance movement emerged to become the great innovation in financial intermediation that reduces the costs and risks of lending to poor house-holds. We will tackle the MFI program Ameen in this thesis and try to answer the main research question: what is the effect of microfinance on poverty reduction? A question that summarizes this memoir. The literature part required an overview of lots of articles and books as well as academic books, those opened the door to develop my research question more and study the effect of microfinance. In order to obtain a fruitful conclusion, we have conducted a panel data analysis to study the effect of different factors such as age, gender, economic sectors, number of children and the amount of the micro loan on household's consumption and income. We have deduced that microfinance is effective in reducing poverty within some limits.