August 14, 2023
Introduction
In the world of measuring success in terms of money, microfinance is a service that makes financial aid such as small loans and insurance available to individuals who are denied financial support from conventional banking services. The main objective of a microfinance service is to empower individuals to break the shackles of poverty and lead a confident and satisfying life in society. It also supports small businesses and ambitious individuals to action their ideas and achieve their business goals.
Social Impacts Created by Microfinance
Measuring success is not only in terms of finance but it is beyond the scope. Although the focus of micro finances is to cater to financial needs, the social and macro-economic impacts are high. Quantifying the impacts of microfinance programs can be done by the social and developmental outcomes. Some of the social impacts created by microfinance are as follows:
1. Reduction of Poverty:
The primary goal of microfinance is to reduce poverty. If you are wondering how Microfinance can help you alleviate poverty here is the answer. Microfinance provides financial aid that helps people balance their finances.
To measure this success, there has to be a systematic way to evaluate the change in income. One way to do so is to set a benchmark to assess the overall well-being of the borrowers from there on. With constant evaluation and support poverty alleviation is possible.
2. Provides Employment and Encourage Entrepreneurship:
Microfinance is very instrumental in bringing out budding entrepreneurs in society. All the necessary capital required will be provided by microfinance to start your new, small business or organization. Underprivileged people will not be propelled to give up their dream as money could be a constraint.
Success is not only concerning the money but the job requirement it has created, and how it has contributed to the economy. The impact of microfinance can be tracked with the record of employment created and the number of budding entrepreneurs in the country.
3. Empowering Women:
Microfinance has not only been providing financial stability but has a positive impact on women’s empowerment. When women are independent, their decision-making ability increases and can acquire control over finances effortlessly.
Measuring success with a change in women’s social status is what contributes to society positively. And microfinance has been helping build women’s status and stature high.
4. Improved Health and Education:
When you are financially stable, you will have access to improved health and education. Being financially stable is a key to better access to healthcare and education. With appropriate financial stability, people can focus more on health and education without compromising their life.
We can measure social impact here by tracking changes in health outcomes of the borrowers and education enrolment and literacy level after seeking help from microfinance.
5. Strength to Sustain Shocks:
Who would not want to be resilient to financial shocks? Microfinance can enhance borrowers’ resilience to economic shocks and disasters. It helps the debtors to get back on their feet without falling back to the poverty line.
Microfinance not only provides financial support but also gives the self-confidence to stand against economic stability. Financially underprivileged people will gain the confidence to deal with their daily hustle without giving up on their life.
6. Client Satisfaction and Well-being:
Microfinance does not stop after lending money, but it keeps monitoring the well-being of its borrowers to avoid any undesirable outcome.
Monitoring the well-being of the clients is crucial to understanding the client’s well-being. A regular survey has to be conducted in this direction to evaluate the effectiveness of the service.
7. Long-Term Sustainability:
Long-term sustainability indicates whether the borrowers can lead a happy and meaningful life even after the repayment. The main objective of microfinance is achieved only when the borrowers can achieve their economic goals.
Microfinance keeps track of their client’s financial aid so that the repayment should not burden the borrower’s lifestyle. The main agenda is to make life better and not worse. Therefore, they verify every aspect of borrowers’ records to help them lead a normal life even after the repayment of the loan.
8. Social Return on Investment (SROI):
All the above-discussed points can be evaluated with a practical methodology called social return on investment. It collectively considers both financial and social outcomes to measure the effectiveness.
Solely relying on the financial evaluation would not reveal the effectiveness of the financial service, as they do not show the social outcome after consuming the financial service. However, a mix of qualitative and quantitative evaluation can show how the financial service has impacted the lives of the borrowers.
Conclusion:
In the period where most finance sectors focus on ROI, Microfinance enhances helping underprivileged ventures. Therefore, the impact of microfinance is not only measured in terms of money but the social awareness and improvement formed in society. With the above-mentioned facts and checks, it becomes clear that microfinance has surely built a positive impact on society’s well-being.
