Microfinance and Poverty Reduction in West Africa: A Critical Review of Effectiveness and Livelihood Sustainability
Keywords:
microfinance; poverty reduction; livelihood sustainability; financial inclusion; household resilience; West AfricaAbstract
Microfinance has expanded across West Africa, yet its capacity to produce durable reductions in poverty remains contested. This study critically reviewed recent empirical and policy literature on the effects of microcredit, microsavings, micro-insurance, and digital financial services on household welfare and livelihood sustainability in the sub-region. The review applied a structured search and thematic synthesis of peer-reviewed studies and authoritative institutional evidence published mainly between 2020 and 2025. Evidence was organised around immediate poverty outcomes, longer-term livelihood outcomes, service-delivery models, and contextual conditions. The synthesis showed that microfinance generally improved financial access and could support modest short-term gains in income, consumption smoothing, enterprise continuity, and women’s economic participation. However, durable effects on asset accumulation, income stability, and resilience to shocks were uneven. Credit-only models produced less consistent welfare outcomes and could increase repayment stress where interest costs were high or enterprise returns were volatile. Savings-led and integrated models combining credit, savings, insurance, digital payments, and financial capability support appeared more conducive to sustained welfare gains. Institutional quality, consumer protection, financial literacy, gender relations, market access, and rural conditions shaped results substantially. The study concludes that microfinance can support poverty reduction in West Africa when it forms part of a broader livelihood strategy, but it cannot substitute for productive employment, social protection, infrastructure, and effective regulation.
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