Micro-finance and poverty in India: A state-level analysis of impact assessment

Abstract

During the last decade, microfinance has been recognised as one of the most important and innovative ways to address the financial needs of the poor. Despite being an issue with considerable policy implications, there are very few studies which empirically examine the impact of microfinance on poverty in the case of India. Analysing the formal and informal segments of financial system of India, the present paper provides an impact evaluation study of microfinance in India. The study is done on three dimensions of microfinance: 1) client outreach, 2) financial health, and 3) poverty reduction. The impact evaluation study is done following a unique methodology different from the widely used microfinance poverty penetration index. The paper incorporates impact of other relevant economic variables like infrastructure and banking sector development on poverty in the analysis, hitherto overlooked in literature. The result presented in the paper shows that the impact of microfinance on poverty alleviation in Indian states, when controlled for other variables, is not significant. © 2018 by IGI Global. All rights reserved.