The Impact of Microfinance on Household Welfare in Kyrgyzstan

Abstract

The main objective of this study is to empirically investigate the microfinance impact on the poverty status of households. Research is based on the Kyrgyzstan Integrated Household Survey data for 2013. Following the empirical literature that use similar cross-sectional data, instrumental variable approach is adopted in order to address the endogeneity issue. Results of the probit model with instrumental variable indicate that receiving microcredit considerably decreases the probability of being poor. This finding is in line with previous studies which state that microfinance has positive influence over the poverty reduction. Along with microcredit usage, several other factors appeared as important for poverty. These factors: regional differences, household head educational background and occupation, household composition in terms of the general household size and child and dependency ratio. In particularly those households who are mostly employed as agricultural own-account worker have higher probability to be poor.