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Assessing microcredit's role in enhancing economic well-being among low-income individuals in Sub-Saharan Africa

Year: 2025

Type: article

Abstract: The study assesses the impact of microcredit on the economic welfare of low-income households across SSA from 2009 to 2019. The study used econometric methods, including panel regression models and the Generalized Method of Moments (GMM), to evaluate microcredit's role in enhancing economic well-being among low-income individuals in SSA. The choice of GMM was to address potential endogeneity. The results demonstrated the effectiveness of microcredit in alleviating poverty. The findings suggest that poverty reduction strategies should incorporate microcredit alongside improvements in education, infrastructure, and healthcare to achieve optimal outcomes. The study also identified education, population growth, per capita GDP, and transformed agriculture as critical factors in ensuring microcredit's effectiveness in improving economic well-being among low-income individuals in SSA. Microcredit is a valuable tool for enhancing economic well-being among low-income populations. Governments, financial institutions, and stakeholders must make deliberate efforts to sustain and expand microcredit in impoverished environments. Microcredit has the potential to address the low-income syndrome in SSA and reduce income inequality across social classes.

Source: Asian Journal of Economic Modelling

DOI: 10.55493/5009.v13i3.5527

Authors: Eric Effah Sarkodie, Ismael Maloma

Institution: University of South Africa

Language: English

Topic: Microfinance and Financial Inclusion

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: No poverty, Decent work and economic growth, Reduced inequalities, Good health and well-being

Open Access status: diamond

Funder: University of South Africa