Do Self-Sustainable MFI:s help alleviate relative poverty?

Abstract: The subject of this paper is microfinance and the question: Do self-sustainable MFI:s alleviate poverty?. A MFI is a micro financial institution, a regular bank or a NGO that has transformed into a licensed financial institutions, focused on microenterprises. To answer the question data has been gathered in Ecuador, South America. South America have a large amount of self sustainable MFI:s. Ecuador was selected as the country to be studied as it has an intermediate level of market penetration in the micro financial sector. To determine relative poverty before and after the access to microcredit, interviews were used. The data retrieved in the interviews was used to determine the impact of micro credit on different aspects of relative poverty using the Difference in Difference method. Significant differences are found between old and new clients as well as for the change over time. But no significant results are found for the difference in change over time for clients compared to the non-clients. The author argues that the insignificant result can either be a result of a too small sample size, disturbances in the sample selection or that this specific kind of institution have little or no affect on the current clients economical development.