The impact of microfinance programs on monetary poverty reduction. Evidence from Sudan
| DOI | https://doi.org/10.1108/WJEMSD-05-2019-0036 |
| Date | 13 November 2019 |
| Published date | 13 November 2019 |
| Pages | 30-43 |
| Author | Mustafa Hassan Elsafi,Elsadig Musa Ahmed,Santhi Ramanathan |
| Subject Matter | Strategy,Business ethics,Sustainability |
The impact of microfinance
programs on monetary
poverty reduction
Evidence from Sudan
Mustafa Hassan Elsafi
University of Nyala, Nyala, Sudan, and
Elsadig Musa Ahmed and Santhi Ramanathan
Faculty of Business, Multimedia University, Malacca, Malaysia
Abstract
Purpose –The purpose of this paper is to examine the impact of microfinance programs sponsored by Sudanese
microfinance institutions (SMFIs) on monetary poverty reduction in Sudan where poverty is widely spread.
Design/methodology/approach –The study adopted the control group approach, where income
and expenditure are taken as welfare indicators. The updated World Bank’s international poverty line of
1.90 per person per day was adopted to separate the poor from non-poor. The data were collected by the
means of a questionnaire distributed to a random sample of beneficiaries in the institution under study. The
study adapted the Foster, Greer and Thorbecke (FGT) model to evaluate the role of microfinance programs in
poverty reduction. Furthermore, to gain more insight into the impact of the program, a preliminary analysis
was conducted using the independent-samples t-test to examine the difference in the welfare indicators for the
sample of the control group and treatment group as well as that of the small loan group and micro-loan group.
Findings –The findings show that the microfinance program provided by SMFIs has reduced the monetary
poverty among the participants. The results also reveal that beneficiaries who had received a larger volume of
loan were noted lesser poverty than those who had received very small loan size. Moreover, the results
demonstrate that poverty indices based on expenditure as a welfare indicator are far lower than those based
on income for both groups.
Originality/value –This study contributes to the available literature by filling the gaps through including
income and expenditure as monetary variables, which included separately in previous studies adopted the
FGT model in the area of microfinance, in addition to exploring the role of loan size in the effect of
microfinance on poverty reduction.
Keywords Microfinance, Sudan, Impact assessment, FGT model, Monetary poverty
Paper type Research paper
1. Introduction
No societycan surely be flourishingand happy when the greaterpart of the societyis poor and
miserable”(Smith, 1776). Therefore, the main goal of development policies must be to lifting
people above thepoverty line in particular in less developing countries(LDCs) where poverty
still a live issue (Novignon et al., 2018). According to Nissanke (2002), poor and hard-core poor
usually haveno access to financial institutions, such as banks. Thus,the fundamental premise
of the microfinance approach is thatthe lack of access by the poor constitutesone of the most
critical obstacles to poverty alleviation and further in economic development. Therefore, the
main reason forintroducing microfinance institutions(MFIs) was to bridge this gap. Recently,
microfinance becomes the widest tool used directly in the development of a wide range of
projects, especially in LDCs, which at the stage of growth, and hence MFIs areconsidered as
banks for the poor (Rahman et al., 2017), and Sudan is no exception.
Sudan is a poverty-ridden country, as the IMF (2013) reported that the incidence of
poverty in Sudan is 46.5 percent. The Central Bureau of Statistic (CBS, 2010) reported that
the monthly total household income and consumption expenditure is very low. Mahran
(2007) argued that poverty is one of the most severe problems affecting Sudan economy and
World Journal of
Entrepreneurship, Management
and Sustainable Development
Vol. 16 No. 1, 2020
pp. 30-43
© Emerald PublishingLimited
2042-5961
DOI 10.1108/WJEMSD-05-2019-0036
Received 28 May 2019
Revised 17 August 2019
Accepted 27 August 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2042-5961.htm
30
WJEMSD
16,1
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