Microfinance models in improving 'quality of life': empirical analysis on Indian perspective

Abstract

Poverty reduction is a global issue. In India, this issue is a priority and calls for critical and urgent attention. Microfinance as an approach is considered important for empowerment of unreached people's social and economic status through socio-psychological and financial intermediation. Despite the fact that microfinance institutions have assumed vital part in reducing poverty; relatively a few studies are available particularly to analyse the effectiveness of 'quality of life'. The present paper aims at studying the impact of microfinance in improving the quality of life of poor people in India. Human Development Index (HDI) is used to measure development by combining indicators such as; life expectancy, educational attainment and income into a composite index, thus addressing both social and economic issues. A variety of existing models and theories were critically reviewed and a model is formulated and validated by using the structural equation modelling (SEM) approach. Results show efficacy of the proposed model and evaluates the overall impact of 'quality of life' as measured through HDI. Finally, it may be concluded that the practice of microfinance program may outperform transition economies in countries like India in order to maintain the balance between social and economic benefits of the targeted people.