Microfinance Intervention and Socio-Economic Transformation: An Application of Propensity Score Matching and Difference-in-Difference Technique

Abstract

Socio-economic development is an important barometer for measuring and understanding transformation of individual, family, society and country as a whole. It has gained even more importance in the new economy with a special focus on its transformation aspect. The role of microfinance intervention on socio-economic transformation is an important area of discourse in recent times. Evidences from studies conducted across the globe have appropriately highlighted the potency of microfinance. Consistent with Impact Assessment the study aims at examining the association between microfinance intervention and socio-economic transformation by using a contemporary technique classified as Propensity Score Matching aptly supplemented by another, namely Difference-in-Difference. The linkage relationship between economic transformation and social transformation is examined and issues and evidences of socio-economic transformation are documented. To empirically assess the impact of microfinance on socio-economic transformation a comparative analysis between microfinance (experimental) and non-microfinance (control) groups is conducted by considering Meghalaya as a case by evaluating economic and social variables. PSM enabled perfect comparison between samples of the two groups and inferences were drawn. It was found that microfinance increased income, expenditure and savings of clients better than the control group, transformed individual wellbeing and as such has percolated into transformation of the family and society as a whole with significant changes in education decision making, health status, capacity building, access to social amenities and mobility, which are again less prominent in the control group. Overall, the study establishes that microfinance intervention leads to positive and meaningful socio-economic outcomes.