Impact of Microfinance on Poverty Alleviation

If you want to understand India’s economic future, please don’t just look at the Sensex look at the self-help groups and micro-borrowers in Tier-3 towns Microfinance industry is quietly becoming one of the strongest drivers of the financial sector. And It’s not just about small loans..... It has helped millions of people, especially women - start small businesses, build credit history, and gain confidence We also see community enterprise among first-time borrowers Here’s why I believe this sector will grow even faster in the next few years: 1. Formalization of the informal economy As more local shops and entrepreneurs use UPI, GST, and digital tools, they’ll get easier access to loans. Lenders can now see their income data and offer credit faster and safer. 2. Technology making lending cheaper and quicker Today, loans that once took weeks can be given in hours - thanks to mobile apps, digital KYC, and data-based checks. This is helping lenders serve more people at lower costs. AI-driven risk models and mobile-based KYC have brought down cost per loan drastically. The economics of ₹15,000–₹25,000 ticket-size loans now finally make sense at scale. 3. Shift from group lending to individual micro-entrepreneurs We’re seeing borrowers evolve from joint-liability groups to small business owners seeking working-capital cycles That evolution mirrors the maturity of the Indian credit ecosystem. 4. New players entering the field Fintechs and NBFCs are no longer competing with MFIs, they’re collaborating That teamwork will make funding reach every corner of India That’s the kind of growth India truly needs _ PS: Not a recommendation, its just for educational purposes! #Microfinance

Happy to share a new end-of-year blog post sharing brand-new findings from Baidoa, Somalia, where joint with colleagues at International Food Policy Research Institute (IFPRI) we conducted a three-year randomized trial evaluating a multifaceted intervention targeting ultrapoor households that were primarily internally displaced -- households that had fled other parts of Somalia due to violence, shock or other droughts. The intervention was implemented by World Vision and included short-term cash transfers, savings groups, household coaching, and asset transfers or vocational training. Our trial assessed effects one year and two years following the launch of programming and our brand-new findings (the survey concluded in September!) suggested positive effects on a range of household outcomes. Households are earning more, savings more, have more assets, and are less likely to live in poverty (a treatment effect of 25 percentage points!) Link is in the comments. We will be sharing a full-length paper in the new year and are excited to share evidence from a hugely understudied, but vulnerable context.

Great to finally see our paper in the latest REStat issue--André F. Silva, Camelia Minoiu, Sumit Agarwal! We show that a large-scale microcredit expansion program in Rwanda improved access to credit and reduced poverty. Microcredit can foster local development not only directly through the provision of financial services, but also indirectly by allowing lower-risk unbanked individuals to build a credit history and to obtain, in time, more attractive loan terms from banks. In fact, we find that a sizable share of first-time borrowers switched to commercial banks, which cream-skim less risky borrowers and grant them larger, cheaper, and longer-maturity loans. https://lnkd.in/gewrHbfu

He lent $27 to 42 villagers. Banks said they were unbankable. Muhammad Yunus saw entrepreneurs: In Jobra, Bangladesh, 42 bamboo stool makers were trapped in debt. Not because they lacked skill, but because they couldn’t access fair credit. Their total need? Just $27. No bank would help. No collateral. No formal education. “Too risky,” they said. So Yunus loaned them the money himself. They repaid every cent. And something bigger happened: Their businesses grew. Kids went to school. Poverty lost its grip. That $27 became the seed of Grameen Bank. A radical new idea: The poor are creditworthy. • No lawyers • No collateral • Just trust and peer support Everyone said it would fail. But by 2021: • 95%+ repayment rate • 9.3M borrowers • 97% women • Over $7.6B loaned Here’s the leadership lesson most miss: Yunus didn’t create new people. He revealed the potential that was always there. Banks saw illiterate villagers. He saw financial managers running tight operations with pennies. Where others saw charity cases, he saw scalable businesses. That mindset shift applies to your team, too. That “quiet” employee you overlook? They might be sitting on the insight that transforms your strategy. That “average” performer? Maybe they’ve never been seen for what they truly bring. Yunus’s 3-step framework for unlocking hidden potential: 1. Look beyond credentials Judge people by capability, not background. 2. Build systems based on trust, not control Micromanagement signals fear. Belief breeds ownership. 3. Measure transformation, not just transactions What’s the ripple effect when someone finally believes in themselves? Over 140 million people have accessed microfinance because one man believed in what was already there. Your next breakthrough isn’t about hiring superstars. It’s about recognizing the ones already on your payroll. Want more research-backed insights on leadership? Join 11,000+ leaders who get our weekly newsletter: 👉 https://lnkd.in/en9vxeNk