The Effect of Microfinance on Household Poverty in Rural Sierra Leone: An Econometric Approach to Assessing the Income and Consumption Effect of Microcredit
Abstract
Joe Hassan Kalokoh*, Joseph Alimamy Turay and Martin Alfredo Legarreta-Gonzalez
The efficacy of microfinance as a tool for poverty reduction remains a subject of ongoing investigation. This paper makes a significant contribution to the extant knowledge on this subject by providing a critical examination of the role of microcredits in reducing household poverty, with a focus on rural Sierra Leone. Using a quantitative, cross-sectional, and comparative research design, the study investigates the differences in income and consumption expenditures between 371 microcredit beneficiary and 330 non-beneficiary households in three of the poorest districts. Logistic regression models and multiple linear regression analyses were employed to estimate the average marginal effect of microcredit participation on total household income, adjusting for control variables. The findings reveal critical insights into the effectiveness of microcredit in reducing poverty, highlighting the significance of household socio-economic factors in moderating the impact of microcredit. The study recommends implementing gender-inclusive lending practices, providing financial education programs, and developing region-specific credit frameworks. This research also adds valuable empirical evidence to the ongoing debate about microfinance effectiveness in post-war economies, showing that strategic credit access serves as a powerful instrument for promoting equitable and lasting rural economic growth.