Does microfinance reduce poverty in Lao PDR?

The purpose of this study is to examine whether the village development fund (VDF) program reduces poverty in terms of income and expenditure.

The authors use cross-sectional data that are collected from 361 households in 15 villages in the rural district of Sukhuma of Champasak province in 2012 and use regression for analysis.

The estimate of the empirical model that is used for the econometric analysis is based on the model constructed by Coleman (1999). This study finds that VDF program has a positive impact on household income and expenditure but that the impact is statistically insignificant.

The authors conclude that the VDF program has a minimal impact on poverty reduction in the study area.

Policy-maker should be aware that promotion of the VDF program might not reduce poverty in terms of income and expenditure.

This finding might have significant impacts on poverty reduction strategy of Lao PDR.

It is the first study to investigate the impact of the VDF program on poverty in Lao PDR.