The impact of microcredit on poverty reduction

Abstract

This research was carried out in order to find out the impact of microcredit on poverty reduction. IBM SPSS was used to fit a binary logistic regression model in which five independent variables were confirmed with 86.6% accuracy of predicting potential poverty. The researcher used secondary data to answer the research topic with 198 observations. The dependant variable is poverty which was measured by poverty datum line and the explanatory variables include GDP, Inflation, unemployment, foreign aid and microcredit provided by MFIs as % of GDP. The research results discovered that Increase in GDP, foreign aid and Microcredit provided by microfinance was found significant in poverty reduction although the increase of inflation and unemployment rate will increase poverty. It was recommended MFIs need to provide services to the poorest at affordable interests so as to be effective in reducing poverty