Date of Award
Bachelor of Arts
Sub-Saharan Africa is the only region of the world where the number of people living in absolute poverty continues to grow. The region is characterized as having a large informal economy, within which exist a number of negative social and economic circumstances hindering economic growth and development. Recently, microfinance has been suggested as an innovative approach towards poverty alleviation and increasing standards of living. Through comprehensive synthesis of existing literature, in combination with an examination of the relationships between aspects of formal economies, this paper provides evidence that microfinance institutions can serve as an avenue towards formalization. However, incentivization, supporting programs, appropriate regulations, monitoring, and cultural considerations are all necessary in ensuring that microfinance institutions facilitate efficient progression from informal to formal economies. In order to further support the findings of this paper, a potential empirical model is proposed, although data sets for pertinent variables are not yet comprehensive enough to carry-out such a regression. This paper identifies gaps and biases in existing data, and highlights the necessary next steps for research on microfinance and formalization to proceed.
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Boucher, Claire E., "Formalization Effects of Microfinance in Sub-Saharan Africa: Synthesizing Evidence of Potential Transitions from the Informal to Formal Economy" (2016). Economics Student Theses and Capstone Projects. 13.