Poverty Reduction through Microfinance:A Study of SHG-Bank Linkage Model

At the global level, microfinance is perceived to be a remedy for the poverty problem through creation of assets. But credit markets, where the borrowers have no collateral, are not functioning very well, because acquiring information about credit market and borrower's projects are very costly and not perfect. Imperfect information leads to credit market failure. The present paper tries to raise the problem of acquiring information and the theory behind the SHG. The paper, also, elaborates the skewness of SHG and loan spread among the regions of India. The study tries to show that credit spread and poverty are negatively correlated, and, increasing the credit access equally among all regions, can address the problem of poverty and also ensure women empowerment. In future, the success of microfinance will depend on successful redesigning of micro-credit programme.