Is Micro-finance an Innovative Tool for Poverty Reduction? - A Case Study of Block Kulgam of Kashmir Valley

Microfinance has developed some innovative management and business strategies, but its impact on poverty reduction remains doubtful. This paper attempts to provide a critical appraisal on the effectiveness of microfinance as a poverty reduction tool. In this regard study was made in block Kulgam to analyze the impact of one of the microfinance programmes namely Swaranjayanti Gram Swarozgar Yojana in the reduction of poverty. For this purpose a sample of 150 individuals and 20 SHGs was chosen from a total of 501 individual beneficiaries and 60 SHGs respectively through a simple random sampling technique. It was found in the study area that maximum sample beneficiaries were actually worse off after availing the loans. The reason behind this fact is that they pay higher interest rate on micro-credit and on other hand they earn less than prevailing market wage rate. This ultimately does not provide scope for saving and seldom propels the poor beneficiaries out of poverty.