Does Microfinance Program Innovation reduce income inequality? A cross-country analysis

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Abstract This study examines the relationship between microfinance and income inequality at the macro level using cross-country and panel data. We show that a country with higher MFIs’ gross loan portfolio per capita tends to have lower income inequality, which confirms the beneficial role of microfinance in reducing income inequality at the macro level. Our results suggest that microfinance loans can lead to improve the relative income position of the poor in developing countries, albeit slowly. In the light of the foregoing outcomes, some important recommendations are suggested to the policymakers in order to reducing income inequality. Microfinance becomes an even more popular tool for fighting poverty; reducing income inequality; institutions innovate in their products and programs at a rapid pace

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