Socio-Economic Impact of Microfinance: A Study of Neighbhourhood Groups (NHGs) in Nilambur Block of Malappuram District, Kerala

Around the world, provision of microfinance is becoming a mainstream development intervention for poverty alleviation and empowerment of the poor. Microfinance involves the provision of thrift, credit and other financial services and products of very small amount for enabling the poor to raise their income levels and improving living standards. As a concept it emerged in the early 1970s with the recognition that the poor need a wide range of financial services including credit, savings, and insurance and money transfers. Microfinance is operated through small groups. The size of the group is restricted to small number ranging from five to twenty to ensure group solidarity and effectiveness. Homogeneity in terms of socioeconomic conditions and levels of living form the basis for group formation. Experience around the world reveals that this group-based approach can equip the poor to access financial services on easy terms and conditions. Microfinance has the capacity to enhance the socio-economic development of the vulnerable and marginalised group, especially women by creating a community based structure that builds mutual support and trust.