An Analysis of the Relationship Between Access to Loans and District Poverty Rate in Malawi

Access to credit is one of the important channels that developing countries can employ in the effort to reduce poverty. Literature shows that the countries that have expanded the accessibility of credit and loans to vulnerable households have also registered positive results in poverty reduction. This study investigated the relationship between district poverty rate and access to loans and credit in Malawi. The apriori expectation was that with an increased access to loans for agricultural households, there will be a resultant reduction in poverty. Using panel data from Integrated Household Survey (IHS1) 2 and 3 in a random effects regression model, the results show that there is a relationship between access to loans and poverty reduction with the increase in the former leading to the reduction of the later. Also literacy rate and access to electricity were used as control variables and were significant factors in the results DOI: 10.5901/mjss.2014.v5n13p134