Microfinance and Rural Entrepreneurship: An Assessment

  • Sudipto Ghosh
  • Amit K. Bhandari


The microfinance program is believed to connect rural micro-enterprises with formal financial systems and has been emerged as an effective tool to solve poverty and unemployment problems in rural areas. To what extent Microfinance Institutions (MFIs) help in enhancing income of rural micro entrepreneurs? The present study addresses this issue by investigating the superiority of credit provided by MFIs in terms of earnings of microentrepreneurs compared to other means of financing. The dataset contains information on 200 rural microentrepreneurs, collected from Howrah district of West Bengal state of India. The result indicates that borrowing from MFIs enhance income of microentrepreneurs by 37 % compared to those running business using own sources of fund. Socioeconomic characteristics play an important role in reducing earning difference between borrowers from MFIs and others. Surprisingly, business know-how plays a miniscule role in enhancing income. This can be explained by the type of businesses they are involved. Because as majority of the credits are disbursed to petty trading, compared to manufacturing and agriculture that require more experience.


Socioeconomic Characteristic Rural Woman Woman Entrepreneur Asset Holding Microfinance Institution 
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Copyright information

© Springer India 2014

Authors and Affiliations

  1. 1.Department of SociologyUniversity of KalyaniWest BengalIndia
  2. 2.Department of EconomicsR. B. C. Evening College, Institute for the Study of Labor (IZA)BonnGermany

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