Global Journal of Commerce & Management Perspective
Open Access

Abstract

Effect of Microfinance on Poverty Reduction: A Critical Scrutiny of Theoretical Literature

Nyarondia Samson Mecha

The provision of micro-credit to the poor more especially to the youth and women in the rural poor is an important factor on poverty reduction through empowerment. Most research studies done, have indicated some improvements in job creation as well as increase in income levels through self-employment. There has been signs of independence on the side of the women as well as the youth, on matters concerned with household expenditure on the side of women and education expenditure on the side of the youth being able to raise incomes from selfemployment. The researcher has also discovered that most researchers have used at least two to four models the popular ones being: Grameen solidarity group model, targeting women groups’ model, regular repayment schedule model and village banking model. The researcher has dealt with various discussions, the major ones being: that micro-credit has been able to uplift at-least 55% of its customers out of poverty, they are being supplied by clean drinking water. It is also coming out clear that the poorest of the poor are not benefiting because the majority of these people are not able to repay their loans making them even loose the little they had. It is also advocated that the microfinance institutions should open their businesses to the middle level customers like teachers, clerks, nurses so that they may enable the institutions to operate profitably. Finally the studies have given a warning to their clients that micro-credit is not medicine to the poverty. The favorable recommendations have been to diversify their facilities to be able to cover more clients, to provide training to both their staff and customers for efficient utilization of the loans, and also be able to charge reasonable rate of interest rate