Does microfinance reduce poverty in India?

In this study, propensity score matching is used to assess the impact of micro-finance loans on reducing poverty when they are used for productive means.

"The models [used] take into account the endogenous binary treatment effects and the sample selection bias associated with access to MFIs. Despite some limitations e.g. those arising from the unobservability of potentially important determinants of access to MFIs, significantly positive effects of MFI access on the multidimensional welfare indicator were confirmed by both models, implying a poverty reducing role for MFIs. We found that loans for productive purposes were more important in poverty reduction in rural than in urban areas. We also show that, in urban areas, significant poverty reducing effects of MFIs are observed only for the moderately poor, not for the poor , while they are significant for both groups in rural areas." 

Sources

Imai, K., & Arun, T. The University of Manchester, School of Social Sciences, Economics. (2008). Does microfinance reduce poverty in india?. Retrieved from website: http://www.socialsciences.manchester.ac.uk/disciplines/economics/researc...

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