Does microfinance reduce poverty in Lao PDR?

Abstract

Purpose – The purpose of this study is to examine whether the village development fund (VDF) program reduces poverty in terms of income and expenditure. Design/methodology/approach – The authors use cross-sectional data that are collected from 361 households in 15 villages in the rural district of Sukhuma of Champasak province in 2012 and use regression for analysis. Findings – The estimate of the empirical model that is used for the econometric analysis is based on the model constructed by Coleman (1999). This study finds that VDF program has a positive impact on household income and expenditure but that the impact is statistically insignificant. Research limitations/implications – The authors conclude that the VDF program has a minimal impact on poverty reduction in the study area. Practical implications – Policy-maker should be aware that promotion of the VDF program might not reduce poverty in terms of income and expenditure. Social implications – This finding might have significant impacts on poverty reduction strategy of Lao PDR. Originality/value – It is the first study to investigate the impact of the VDF program on poverty in Lao PDR.