Impact of Microfinance on Poverty Reduction: Critical Perspectives from Literature

Abstract

Microfinance has progressively become a panacea of the evils that inflict the contemporary economies especially the developing ones. There are studies on record that reflect that it helps in alleviating poverty by providing the poor funds through which they are in a position to commence their own business venture and hence it promotes the income-generating activities of the beneficiaries. This all results in promotion of earning of beneficiaries and helps in enhancing social capital in poor nations. The studies that emphasize the poverty alleviation are also gaining momentum in the literature and other scholarly works. As a result, more recently concerns have been raised about the real worth and impact of microfinance. In this direction, the present study is a stride that aims to ascertain the impact of microfinance on the much talked macroeconomic objective of poverty alleviation. For this purpose, the existing literature has been investigated both nationally and internationally. The extensive analysis of literature shows mixed results. Some reveal positive impact of microfinance on its beneficiaries while others clearly reject it. The studies that negate the positive role of microfinance emphasize that very poor are still outside the ambit of microfinance. Thus, based on critical perspectives from literature, it can be concluded that microfinance is one of the tools of poverty alleviation. However, it cannot alleviate the poverty from the grassroots level of society unless supplemented by other socio-economic initiatives where the government, NGOs and microfinance institutions would play a vital role.

Keywords: Beneficiaries, Income Generating Activities, Literature, Microfinance, Social Capital

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