Measuring Access of Microfinance on Poverty in India:Towards a Comprehensive Index

The outreach of microfinance programme is considered to be a means to enhance the economic well-being among the member households through poverty alleviation. A wide cross-country variation in the outreach of microfinance programme to the poor households is observed in the world. Despite the significant growth of microfinance institutions and its active borrowers, the penetration of microfinance lending services to the poor households in India is observed to be limited. In addition, there is a wide inter-state disparity in the achievement of microfinance outreach in India especially among the poor households. A composite index has been constructed using the penetration, availability and usage indicators of microfinance outreach to examine the interstate variations in the level of its achievement. Subsequently, attempt has been made to analyse the role of microfinance in alleviating poverty across the states of India. The result shows that out of 27 states and Union Territories, only in seven states (Kerala, Andhra Pradesh, Tamil Nadu, Goa, Himachal Pradesh, Tripura, and Karnataka) outreach of microfinance programme has made a significant impact on the reduction of poverty.