ABSTRACT
The literature is divided on the issue of the role of microfinance in poverty reduction. One school of thought, mainly led by people such as Mohammed Yunus, strongly believes in microfinance institutions (MFIs) and asserts that ‘easy access to credit, and easy access to a global network of information for the poorest women and men anywhere in the world will eliminate poverty from our planet more surely and speedily than anything else’ (Yunus, 1998: 25). Sarangi (2007) assessed the impact of three major microfinance programmes in Madhya Pradesh, India, employing different delivery mechanisms. The impact assessment results showed ‘a positive and significant effect of programme participation on increase in the income of the household’. Arun et al. (2006) found ‘significantly positive’ impacts of microfinance on various indicators of household poverty in India. The study also showed that in rural areas, ‘significant results were observed only in the case where the access to MFIs was defined as household taking loans from MFIs for productive purposes and not in the case of simply having access to MFIs’. In urban areas, significant poverty-reducing effects were noticeable even when a household had an access to an MFI but did not obtain a loan.
