Is Microfinance Beneficial or Opportunistic?

Abstract

Microfinance has been established targeting access to finance for poor people who are screened out from getting loans from formal financial institutions due to lack of collateral and low creditworthiness. There has undergone a tremendous transformation in all aspects of microfinance, including outreach and portfolio size, proliferation of microfinance through a large number of microfinance institutions, diversification of services, new regulatory regime, contribution in rural development, recognition of microfinance as a major contributor in poverty reduction, etc. However, the microfinance sector is facing many challenges regarding institutional capacity, quality, and diversity of services, fallout from political and macroeconomic factors, replication of agricultural credit, and so forth. The objective of this article is to find out whether microfinance has impact on poverty reduction and economic development at all.