Assessing the Economic Impact of SHG-Based Microfinance on Rural Households

Abstract

Microfinance based on Self Help Groups (SHGs) has become an important means of attaining financial inclusion and improving the socio-economic status of rural households in India. By providing savings, credit, and other financial services, SHGs help rural households, in particular women, to participate in income generating activities and improve their economic status. This paper analyzes the economic impact of microfinance based on SHGs on rural households. The paper analyses the contribution of microfinance on income generation, employment creation, asset creation, and poverty alleviation. The research explored how one can access microcredit, which helps promote working activities in the agricultural sector and household investments. The study analyzes the role of SHGs in promoting financial literacy, saving behavior, and decision-making capabilities of the members of SHGs. Collective participation and support from other SHGs enable rural population members to obtain social and economic empowerment impacting their lives. Although microfinance based on SHGs faced issues such as the small volume of loans, repayment evocations, or unequal access to credits, it has demonstrated a significant efficiency in enhancing the living conditions of the households.

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