Investment in reactive reserves is one of the attractive methods of improving the electrical distribution system performance. The motivations for providing reactive support in the distribution systems often involves meeting one or several objectives. These include but are not limited to reducing the distribution losses, flattening of voltage profile and improving substation/source power factor. The substation/source power factor correction entails a continuous local supply of the reactive power at the point of common coupling (PCC) to satisfy the local reactive demand of the load, thus eliminating the need of supplying the reactive demand from the source. This type of load compensation also helps in voltage regulation, thus resulting in a well-regulated voltage profile across the distribution feeder. In this paper, a matrix converter topology based distribution static synchronous compensators (D-STATCOM) has been used in low voltage distribution network to compensate the time-varying reactive demand of the load, thereby achieving a unity power factor operation irrespective of the load power fluctuations. To achieve a long service life, energy is stored using inductive chokes instead of electrolytic capacitors. The inductive-loaded D-STATCOM is controlled using finite control set model predictive control (FCS-MPC) to supply reactive power to the distribution network. To verify the proposed approach, experimental studies were performed and the results obtained from a 7.5KVA test prototype showed the effectiveness of the proposed technology in reactive power compensation.