The microfinance promise in financial inclusion and welfare of the poor: Evidence from Karnataka, India

Microcredit is a recent addition to Indias poverty-alleviation strategy. Of late, there has been a paradigm shift from microcredit to microfinance. This study examines the promise of microfinance in the inclusion of poor, who have been left outside the gamut of formal financial markets for a long period of time. The study also examines the impact of microfinance-plus services on the household economy of the members. This paper uses primary data on household participants of microfinance programme in the state of Karnataka. We find that a majority of the sample households in the pre-microfinance programme were vulnerable to both access the financial and non-financial services. In the post-microfinance intervention, a large number of the member households are able to access the microfinance-plus services and it has enhanced the income, employment, assets, household expenditure, housing condition and empowerment of the poor. Policy recommendation includes delivery of microfinance-plus services to the marginalized and vulnerable poor at a minimum cost will have wider impact on the socio-economic well-being of the poor.