Livelihood Security among Self-Help Groups an...

Livelihood Security among Self-Help Groups and the Influence of Microfinance on Income Generation

Author Name : Dr. Lokesha M N

ABSTRACT Microfinance is fundamentally the practice of offering credit, savings, and insurance services to poor, enabling them to establish or expand income-generating activities in agriculture, related sectors, and non-farm enterprises. This approach serves as a mechanism for alleviating poverty. Microfinance represents a traditional and well-established business model. It has proven to be an effective development assistance tool, reaching millions of disadvantaged individuals and sparking a transformative movement. This model provides a viable alternative for those previously excluded, facilitating their social and economic empowerment through financial and social intermediation. Within the realm of microfinance, group-lending contracts characterized by joint liability are widely recognized as a promising innovation to address imperfections in rural credit markets, thereby mitigating risks. The joint liability among group members incentivizes or obligates them to engage in the selection, monitoring, and enforcement of loan repayment in a cost-efficient manner. Consequently, this results in lower transaction costs, an increase in transaction volumes, and enhanced access to credit for the impoverished. In rural India, poverty has become increasingly feminized due to factors such as high population growth among landless agricultural laborers (including marginalized communities), low skill levels, lack of wage employment opportunities, and insufficient institutional support for creating wage-based or self-employment. These economic drivers of female poverty intersect with sociocultural barriers and discrimination against women's economic participation. The objectives of self-help groups are to foster strong, independent women's collectives that can guide their own development and that of their communities. Through greater involvement in economic activities, women will be equipped with managerial and technical capabilities. In this context, it is important to generate information and analyze the extent to which these microfinance programs have been able to reduce poverty and vulnerability by: increasing householdlevel capital/asset formation, improving household and enterprise incomes, enhancing individuals' and households' capacity to manage risk, expanding enterprise activity within households, creating more non-farm employment opportunities for the poor, empowering women, and improving community-level access to other financial services.