THE EFFECT OF MICROFINANCE SERVICES ON POVERTY REDUCTION: ANALYSIS OF EMPIRICAL EVIDENCE IN SRI LANKAN PERSPECTIVES

Microfinance has been identified as a powerful tool for reducing poverty in the developing counties after won the Nobel Prize for Grameen microcredit program, Bangladesh in 1986. With the rapidly spared of microfinance in the world, the researcher also paid attention to microfinance related studies. There are positive and negative impacts of microfinance on alleviating poverty in the world. This article presents the review of empirical studies that have conducted to identify the impact of microfinance on reducing poverty in the world and Sri Lanka. The review revealed that the majority of existing studies were recognized the positive relationship between microfinance and poverty and most of these studies summarized outcomes that microfinance‘s potential in reducing poverty. Few of them were realized that there were mixed effects of microfinance on poverty reduction. Furthermore, the wealth of empirical evidence available to investigate the relationship of microcredit and micro-savings on poverty alleviation while few studies had identified the impact of all elements of microfinance on poverty reduction.

JEL: G2; G21