Economic, social and fiscal analyses of microcredit applications

Today, hunger, poverty, deprivation, and unemployment continue to be the issues both the developed and the developing countries have been facing around the world. Various policies are applied to overcome these issues in public and private platforms at the national and international levels. The microcredit is one of these policies applied first in Bangladesh in the 1970s, and since then many countries implemented it. Its implementation in Turkey had to wait until 2000s. Microcredit is presented in the literature as a response to the traditional banking system that excludes the poor from the economic system. Hence, microcredit aims to provide the initial capital to the poor with low or no income to whom commercial banks are unwilling to grant loans so that they can start up a business or improve existing one. Besides providing revenue and employment generating opportunities social aims such as empowerment of women in the society, combatting gender discrimination and improvement of health and education levels of women and children are hoped to be achieved. Microcredit has the potential to contribute to the fiscal sphere such as the reduction of the state's economic and social intervention. The purpose of this study is to investigate theoretically and empirically whether and to what extent the microcredit has attained the aforementioned goals. This study first reviews the empirical studies in the literature extensively and then tests the relationships between microcredit and some macroeconomic and social indicators such as per capita income, income inequality, poverty, employment, education and health indicators by employing Panel Regression Analysis. The literature argues that microcredit applications have positive impacts on economic, social and fiscal spheres. And yet we have to point out that it is hard to imagine that microcredit might exercise radical influences on the serious problems such as global poverty, unemployment, gender discrimination In our study, three indicators of microcredit variable are used: Microcredit amount, number of active borrowers and average microcredit amount per borrower. In the simple panel regressions, microcredit is found to have low but significant effects on per capita income, GINI coefficient, poverty rate, female unemployment rate and self-employment activities, primary school enrollment rate and on public and private health expenditures. However, the significant effects of microcredit on these variables mostly disappear in multiple regression analyses where additional macroeconomic variables that are likely to affect respective dependent variables such as export, employment, inflation, interest rate, public health expenditure are included in the regressions. Keywords: Microcredit, Income, Income Inequality, Poverty, Employment, Education,Health, Panel Data Analysis.