Microfinance has been a tool of change for years, particularly for rural women, who are the primary recipients of micro-loans, but it is not just a tool to alleviate poverty. For years, microfinance has been a catalyst towards individual development and has registered a noticeable growth towards promoting entrepreneurial activities in poor, and primarily rural, areas. Microfinance has been an agent of socio-economic change for the last few years, helping not just to rejuvenate rural communities but also to break social barriers by reaching lower castes.

While, for decades, the formal banking channels have not been able to meet the credit needs of the poor, the growth of MFIs has helped in successfully scaling up of the rural economy by preventing exploitation of the rural poor from money lenders, who called the shots for almost three centuries. MFIs have not only opened up the rural credit sector but also helped in substantially increasing the ambit of employment and poverty eradication. Whatever shortfalls the formal banking channels had come across in the financial inclusion of a large section of the populace, MFIs have mitigated that in terms of their services to the poor.

Sa-Dhan, the self-regulatory organization of MFIs, noted that MFIs have been successful in bringing together microfinance and livelihood in order to provide a better life for their clients, most of who come from rural areas of the country. Going through operational models in states like West Bengal and Odisha, Sa-Dhan noted that even extremely poor people, including traditional artisans and agricultural workers, who hardly had a say in the rural economy, did not just have access to MFI loans but also productively use these loans in a manner that provide livelihood to people other than only their family members.

In one of its recent reports, the ADBI found that microfinance “effectively generates employment and sustains the income of the rural households by giving them often opportunity of work”. Even though both Sa-Dhan and the ADBI found that efforts need to be extended further in order to extend microfinance services, MFIs have already emerged as the right platform to optimize credit needs and help the rural poor in their fight against poverty.