MICROFINANCE AS A TOOL FOR POVERTY REDUCTION: CASE OF WESTERN BALKAN COUNTRIES
Microfinance is of a vital importance to the unprivileged people especially in the developing countries. People with no means of sustaining themselves, rely on microfinance for a variety of services as a means for poverty reduction and increasing happiness. This study employs a Fixed Effects Model to analyze the impact of microfinance and some other macroeconomic factors on poverty reduction in Albania, Montenegro and Bosnia and Hercegovina. Empirical findings suggest that inflation does not play a role on the poverty reduction. On the other hand, total output (GDP) and microfinance (GLP) are found to be highly statistically significant in explaining the poverty reduction in the respective countries. Therefore, putting serious efforts on increasing GDP and supporting microfinance institutions may help the countries reduce the poverty level. Keywords: Western Balkans, microfinance, GDP, poverty reduction, fixed effects model