Working Paper No. 29
Microfinance as a system of delivering financial services to a previously ignored, excluded and disadvantaged population, who are also the poor, is expected to make changes in the lives of the poor. The poor, who lack access to funds to take advantage of the opportunities, should be able to generate income and accumulate assets as microfinance delivers the financial services. In the Gambia and Senegal, microfinance should reduce poverty, by offering the poor with the necessary financial services. Yet it is important to note the employment activities generated by microfinance institutions. The study uses descriptive statistical analysis in investigating the main microfinance factors influencing poverty. In fact, in case of the Gambia, increasing micro credits to the poor seem to result to a worsening poverty situation. Two main factors explaining poverty were pointed out in case of Senegal (i) income per capita and (ii) inequality in income distribution. Hence, the study makes some recommendations for the two countries (i) an improvement of the growth-led policy environment, (ii) the design and implementation of specific polices reducing income distribution within the population and (iii) enhancing the microfinance regulation and policy framework so as to provide sound financial services to the poor. There is also a need for capacity building in MFIs and general development of the sector to make it an effective tool for poverty reduction.
As adopted by author