The role of microfinance in improving living standards: Evidence from Tunisia

Abstract

The main objective of this article is to investigate the effects of microfinance on poverty alleviation and improving living standards of poor households in Tunisia. To the best of our knowledge, this is the first study that analyzes such topics in the Tunisian context. We employed Logistic regressions (both binomial and ordered logit) and Fuzzy‐set qualitative comparative analysis (fsQCA) to examine the consequences of microfinance usage. Based on complexity theory, fsQCA contributes to the literature by generating a richer understanding of complex poverty phenomena. Overall, we find a positive and significant relationship between the amount of microcredit an individual receives and the improvement of the living standards of beneficiaries. The improvements mainly relate to increased income, improved health care, and more consistent attendance at school. This study shows the potential for microfinance to reduce poverty in Tunisia, especially in the period following the Arab spring.