Microfinance and Poverty -A Macro Perspective

Building on the recent literature on finance, growth and hunger, we have examined the experience of Asian countries over the last five decades, using dynamic panel models. Although the results are mixed, depending on the specification and variables used, there is some evidence favouring a positive role of finance in growth of GDP and agricultural value added. While financial development reduces income inequality, the effects on hunger are not so robust. Although microfinance has considerable potential for ameliorating deprivation, the contraction of credit and risk aversion of investors, together with a faltering global recovery, underlie gloomy prospects for the poor in Asia.