Abstract
This paper seeks to dispel the notion that Microfinance in itself is an effective poverty alleviation tool. It is a multi-faceted tool in promoting financial resilience, reaching the excluded, empowering women and developing the capacity of small groups of people to take control of their own lives. However, at the same time clients of Microfinance Institutions have fallen prey to high levels of over-indebtedness, financial distress and debt dependence. To tackle these challenges, development initiatives which can be clubbed with Microfinance have been explored, and suitable changes have been recommended, in this paper. The role of specialized algorithms which use a clients‘ digital footprints to determine his/her credit worthiness and the use of psychometric evaluations to assess default risk has also been looked at in great detail. The paper concludes with case studies of three new age microfinance institutions who are leveraging technology in novel ways to tackle challenges which, until now, seemed insurmountable.
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