In this paper we will analyze the possible effects of microfinance. Microfinance is yet to prove its worth as an instrument that would reduce poverty and bring a change in the rural socio economic structure. In some countries it is already generating positive results.
The study of the Impact of Microfinance means how the micro financial services effects on the lives of the rural and as well as urban poor people. That is, whether or not micro finance enhance the process of income growth, poverty reduction, asset building etc.
It is not very much clear to all that if or not microfinance is the best possible method to improve the socio-economic structure in the rural areas. The admittance of commercial banks and other formal financial institutions into microfinance may enhance the competition for the on going microfinance institutions. Although it may better the rural financial sustainability but minimize lending to the poor.
Several impact indicators are there by which we can analyze the utilities of microfinance. These are:
Overall household income
Improvement in health and education
Based on the above, the impact of microfinance on the poor people are discussed below.
Microcredit helps to increase the household income.
Through microfinance, people can diversify their income sources and enhance the enterprise growth.
In Russia, the introduction of microfinance eases loan processing procedures.
It provides access to financial services to the poor people which enables them to establish and change their assets.
Microfinancial services enable the poor people to minimize the risks and take greater advantage of upcoming opportunities.
In India, through micro finance the government have created many job opportunities in the rural areas.
For the women, microfinance offers greater control over the available resources to them.
The clients of microfinance can increase their savings’ level than the non-clients.
In some country, the introduction of microfinance leads to an increase in the enterprise revenue.
Last Updated on : 30th July 2013