The Microfinance Promise in Financial Inclusion and Welfare of the Poor: Evidence from India

This paper studies the impact of microfinance on financial inclusion of poor marginalized and vulnerable populations. It focuses on the impact of the “credit plus services” approach on income, employment, assets, household expenditure, housing conditions and empowerment of the poor.

The paper discusses the potential of microfinance as a poverty alleviation strategy. It examines primary data from two MFIs in the Indian state of Karnataka to understand the impact of microcredit and other microfinance services on poor households. Findings include:

• Credit plus services approach to microfinance is positively correlated with improvement in income, assets, employment and household expenditure;
• Microfinance increases access to credit for consumption and productive activities;
• Microinsurance reduces vulnerability of the poor;
• Credit plus services such as skill enhancement training, awareness programs and networking facilitate empowerment of the poor.

The paper states that credit plus services uplift the poor from poverty and empower them through awareness generation. It recommends that accessible and affordable microfinance services should be provided for the socially and economically excluded populations.