Abstract. The article empirically examines the impact of microfinance on poverty alleviation in the SAARC region. The study uses panel data from 2000 to 2019 for five selected SAARC countries. The proxy variable for microfinance is gross loan portfolio per capita, and poverty is measured by household consumption expenditure per capita. The other variables are the percentage of active borrowers to the total population, government expenditure on education as a percentage of GDP, and credit to the private sector by banks as a percentage of GDP. The panel data regression model is used to explain the relationship among the variables. Hausman Test suggests the use of the Fixed Effect Model. The results of the Fixed Effect Model reveal that by controlling other variables, the countries having higher Gross Loan Portfolio per capita have higher household consumption expenditure per capita and thus have lower incidences of poverty. R2 value concludes that the concerned variables explain 94.1% of variations in household consumption expenditure per capita.

Keywords: microfinance, poverty, SAARC, panel data analysis.