Economic and Social Impact of Micro Finance Programs: An Empirical Study of SHGs in Rajasthan, India

Abstract

Social impact analyses of microfinance programs aim at gauging the ‘wider impacts’ of micro-lending on the lives of the poor. This wider impact can be taken to be a ‘public good’ that benefit the sector in its entirety: the microfinance institutions (MFIs), donors, borrowers, and even the non-borrowers. This paper intends to provide an insight of the role played by microfinance institutions in enhancing the socioeconomic benefits of the poor in Sikar district of Rajasthan. 100 SHG members from four clusters of Sikar district (Laxmangarh, Harsh, Dhodh and KhoriDungar) which were formed by the NGO across the four directions of the district. Since the main occupation of the people here is agriculture, therefore the clusters are formed according to the productivity of the land and availability of irrigation facilities. Each cluster of the district contains 25 villages, and on an average four SHGs are working in each village, each SHG consist of 15 members in a group. Twenty five SHGs were selected for the study from each cluster and one member mainly the coordinator is taken as the sample. The paper further identifies the variables and indicators of an impact assessment and builds a generic model of the process. The study found that microfinance programs can improve the socioeconomic conditions of the poor people in the district. The study concludes that microfinance sector should extend its hand in the interest of the poor who definitely need a full range of financial success, including financial literacy and educational development.