Microfinance in Latin America: Sustainability, Growth, and Efficiency

The subsequent research addresses the question: Within populous Latin American countries (Ecuador, Mexico, Panama, Argentina, Chile, and Peru), are microfinance institutions associated with differences in GDP and household consumption equally between 2010 and 2018? Which do they have a stronger correlation with? The essence of this question seeks to answer whether the correlation between MFIs and wealth indicators carries over to a national level or merely persists at an individual level. This research has been informed and influenced by literature and studies conducted across South Asia, Africa, and Latin America focusing on the research of Abdelkader, Naveeda, Annim, Campbell, Armendáriz, and Collins. Using OLS and FE models measuring logged GDP and logged household consumption, results establish the efficiency of MFIs at an individual and national level. Findings suggest that the distribution of loans to females has the strongest correlation of non-control variables with logged household consumption and logged GDP, aligning with some past literature. The results of this study serve as policy recommendations, informing Latin American governments as well as non-profit donors concerning how they can effectively, ethically, and sustainably stimulate economic growth.