The Impact of the Dimensions of Microfinance on Poverty Reduction: Confirmatory Factor Analysis (CFA) via Individual Measurement Models
- March 18, 2021
- Posted by: RSIS
- Categories: Banking & Finance, Economics, IJRSI
International Journal of Research and Scientific Innovation (IJRSI) | Volume VIII, Issue II, February 2021 | ISSN 2321–2705
Dr. J.A Prasansha Kumari
Senior Lecturer, Department of Economics, University of Kelaniya, Sri Lanka
Abstract: Poverty is one of the main socio-economic issues holding back the development of economic of the underdeveloped countries. Microfinance is financial services provided to poor households of individuals who have no access to formal financial programs. It has been identified as a key mechanism to reduce world poverty in the recent past. With the revolution of the microfinance sector, it has been able to provide a wide range of services. This study aims to observe the extent to which the dimensions introduced in modern microfinance have contributed to the eradication of poverty. Data were collected using Likert scale questionnaire with total of 496 borrowers benefited under Samurdhi Micro Finance programs in Sri Lanka. Collected data analyzed confirmatory factor analysis by using AMOS 21. The factor loading of the individual measurement models were displayed that 38 items were grouped properly in to the 6 constructs which higher than 0.6
Key words: Confirmatory Factor Analysis, Microfinance, Poverty
I. INTRODUCTION
Microfinance, as per the Asian Development Bank (ADB), is the provision of a broad range of financial services, such as deposits, loans, payment services, money transfers, insurance to the poor, and their businesses (ADB, 2000). Dixit et al, (2019) stated that ‘Microfinance refers to the providing of a broad spectrum of financial services to the low-income people’ and it is closely associated with microcredit. Otero (1999) stated that microfinance is the provision of financial services to low-income people and very poor self-employed people. Cull and Murdoch (2017) defined it as, “Microfinance is generally seen as a way to fix credit markets and unleash the productive capacities of poor people who are dependent on self-employment.” There are key elements of microfinance services such as credit services, savings service, non-financial services; social intermediation services (Kumari et al, 2019; Ali et al., 2014; Ledgerwood, 1999). Consultative Group to Assist the Poor (CGAP) has mentioned that microfinance is the providing of credit, savings and other financial services to the poor. It includes credit services, money transfer services, pensions and insurance as well (Reille et al, 2009).
