Experience shows that microfinance can help the poor
to increase income, build viable businesses, and reduce their vulnerability to
external shocks. It can also be a powerful instrument for self-empowerment by
enabling the poor, especially women, to become economic agents of change.
Poverty is multi-dimensional. By providing access to financial services,
microfinance plays an important role in the fight against the many aspects of
poverty. For instance, income generation from a business helps not only the
business activity expand but also contributes to household income and its
attendant benefits on food security, children's education, etc. Moreover, for
women, who, in many contexts, are secluded from public space, transacting with
formal institutions can also build confidence and empowerment.
Recent research has revealed the extent to which individuals around the poverty
line are vulnerable to shocks such as illness of a wage earner, weather, theft,
or other such events. These shocks produce a huge claim on the limited
financial resources of the family unit, and, absent effective financial
services, can drive a family so much deeper into poverty that it can take years
to recover.