Microfinance and Poverty Reduction in Assam: Uncovering the Nexus between Access to Credit and Household Well-being

Abstract

This study investigates the impact of microcredit access on income and multidimensional poverty in rural Assam, India. Employing a quasi-experimental design and collecting primary data, the study utilises the probit model for empirical analysis. The findings indicate that equivalence factors influence individual welfare levels. Moreover, households receiving microcredit from semiformal and informal sources exhibit a higher incidence of poverty. Informal borrowers experience a more significant poverty gap compared to semiformal borrowers. However, the study does not find statistically significant evidence to confirm a poverty impact from pooled and formal credit sources. The prevalence of income and multidimensional poverty among semiformal and informal borrowers suggests that these individuals rely on borrowing to finance their children’s education and medical expenses. This points to a failure of the government’s universal education and health policies to uplift vulnerable segments of society. The study recommends providing credit facilities exclusively for productive economic activities to rural residents, accompanied by adequate market linkages.