When the conventional wisdom shouts and tells us that traditionally a village economy is change resistant it doesn’t spell out one important assumption embedded in it – the village economy lacks connectivity and empowerment to change. The same assumption also got seeped into the making of policies to develop the rural economy. Let us for example take the case of education. Prof Amartya Sen while commenting on the Indian development connundrum repeatedly pointed out the fact that the Indian policy makers always assumed that the village poor needed to be trained in trade so that they could be self-sufficient. While countries like China and the then USSR focused on general education at the basic level, India’s policy focus treaded a different course thereby restricting the provision of choice and options to the rural human capital.

With changes inititated in the nineties that gradually opened the economy and rising connectivity both physical and otherwise things started to change in the rural economy as well. The rural folks long understood as change resisitant started to challenge the conventional wisdom. Youngsters started to migrate out of the villages into city and when they returned they validated the changes blowing across the country.

Among changes that would go down the history as an important one was the emergence of the microfinance industry. From the day India won its freedom the aim of the nation was to get rid of poverty and tread the path of self reliance. However initiation of the transition of the concept from the macro to micro wasn’t an easy traverse. With the burgeoning microfinance industry the road towards self sufficiency has started moving towards a new horizon by creating micro enterprise and generating employment chains along the way.

One must remember that employment as an outcome directly related to microfinance is not yet available at the macro level and support to the claim being made here is mostly experiential. Our experience tells us that every micro business has a considerable employment generation impact. Take for example the case of goat rearing. In the villages a goat rearing unit can be set up with little capital. Some goats can be made to kid twice in 18 months. They are not difficult to keep and can be reared to yield various benefits.

Our case study shows that funding a goat rearing unit would soon lead to creation of jobs as gothard for more that two persons. A simple back of the envelope calculation shows that just by funding a family to rear goats would not only leverage it off poverty but would also create earning capacity of two more persons at the least and would thereby create support for two more families. And we are talking about creation of an indirect employment chain.

There are similar examples from other trades as well but to understand the impact that the industry is maing towards the cause of poverty alleviation let us extend the goat rearing example. If there are 100 households in a village, a conservative estimate to understand the magnitude of the spread effect, one support goes on to create sustenance for three families directly – three percent of total cohort in the village. Not only that it creates demands in the local village economy that has a multiplier impact.

It also has a social impact. The connectivity has also made the poor aware of the value of education. With the creation of surplus through boosting micro enterprise the microfinance industry is also creating a social impact with varied but all positive impact. With the creation of surplus and greater awareness gained through microfinance interaction those under such finance umbrella now aspire their children to be educated in schools for general instructions. What Prof Amartya Sen rued as the failure of the policy – a push factor – is now being gained through pull because of financial capacity being created by the microfinance activities.

Let me round up by saying that microfinance activity is creating employment directly and indirectly and also employability in future by directly creating a social impact conducive to boosting aspirations for education.