Poverty Alleviation And Microcredit In Sub-Saharan Africa

Abstract

Sub-Saharan Africa (SSA) continues to be the most poverty- stricken region of the world. Concerns about poverty in SSA and poverty reduction efforts for this region have been documented extensively. The most recent effort aimed at global poverty reduction is known as the Millennium Development Goals (MDG). The first of the eight goals of the MDG calls for eradication of extreme poverty and hunger with a target to halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day. An evaluation of this goal in 2005 reveals that SSA countries have failed to reduce the incidence of extreme poverty while other regions of the world have achieved success in this effort. This paper analyzes the incidence of extreme poverty in SSA in relation to the socio-economic infrastructure of the region, its land tenure system, and particularly the growth of microcredit and microentrepreneurship. Using primary data, the paper analyzes the growth of microcredit which operates through 297 microfinance institutes in 34 countries of the region. Extensive use of microfinancing has shown to reduce extreme poverty among the users of microcredit. Use of microcredit at the grassroots level creates a class of microentrepreneur with characteristics similar to the model of entrepreneurship developed by Schumpeter. The study concludes that there is a prospect for the growth of microentrepreneurship in at least 13 countries of SSA allowing for new employment opportunities, savings among borrowers, and reduction of extreme poverty.