Does microfinance program innovation reduce income inequality? Cross-country and panel data analysis

Abstract This paper uses cross-country and panel data set to test the significance of microfinance on income inequality reduction at macro level for a sample 57 developing countries periods 2000–2006 2007–2013. study adopts methodologies, such as ordinary least square (OLS), pooled (POLS) instrumental variables (IV) estimations overcome endogeneity problems among variables. Empirical results show that with higher MFIs’ gross loan portfolio per capita tend have lower inequality, which confirm beneficial outcome in reducing level. Moreover, our suggest loans can lead improve relative position poor countries, albeit slowly. Our findings relevant recommendations policymakers, they could generate suitable strategies consider institutions more popular tool fighting against both poverty inequality.