Microfinance, Microcredit, Poverty reduction, Poverty, Economic hardship, Developing countries.


Microfinance has proved to be one of the effective tools for poverty reduction in developing countries. Following the success stories of the Grameen Bank in Bangladesh, the microfinance revolution has stormed the developing countries today. This paper looked at whether or not microfinance is an effective strategy for poverty reduction in developing countries. It was found out from the related literature that microfinance has a positive impact on poverty reduction and so, it is an effective tool for poverty reduction in many countries including Bangladesh, Bolivia etc. However there are doubts about its large scale impact. It also became clear from the literature that the impact of microfinance on poverty alleviation is a keenly debated issue and it is generally accepted that it is not a silver bullet, it has not lived up in general to its expectation. However, when implemented and managed carefully, and when services are designed to meet the needs of clients, microfinance has had positive impacts, not just on clients, but on their families and on the wider community. It was recommended among others that more efforts needs to be geared towards institution building including the strengthening of groups especially Self Help Groups(SHGs). There is also the need for the development of more effective management information system to promote the consolidation of sustainable financial service delivery through well performing Self Help Groups (SHGs).

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