Evaluating the Socio-Economic Impact of Microfinance on Rural Development in Uttar Pradesh

Abstract

This article evaluates the socio-economic impact of microfinance on rural development in Uttar Pradesh (UP), India, drawing on recent national and state-level evidence from the Self-Help Group–Bank Linkage Programme (SHG–BLP) and the microfinance industry (NBFC-MFIs, banks, SFBs). Using secondary data from NABARD’s Status of Microfinance in India 2023–24, MFIN Micrometer 2023–24 and 2024–25, the National Rural Livelihoods Mission (DAY–NRLM) management information system, and public financial inclusion statistics (PMJDY), the study assesses pathways through which microfinance influences income generation, women’s empowerment, financial inclusion, enterprise formation, and resilience. State-wide analysis is complemented with a district-aware lens that references programmatic outreach in Azamgarh, Jaunpur, Sitapur, Hardoi, and Prayagraj—districts that feature prominently in Uttar Pradesh’s recent ‘Zero Poverty’ campaign—while interpreting results as representative of the state rather than single-district case studies. The SHG–BLP expanded to 144.22 lakh savings-linked SHGs nationally in 2023–24, with ₹2.09 lakh crore disbursed by banks to 54.82 lakh SHGs; the microfinance universe’s gross loan portfolio reached ₹4.34 lakh crore serving 7.8 crore unique borrowers as of March 2024. Parallel gains in financial inclusion are reflected in 8.14 crore PMJDY accounts in UP, though inactivity remains a policy concern. Against this backdrop, the paper synthesizes evidence on socio-economic outcomes and contextual risks—over‑indebtedness, interest rate sensitivity, delinquency pockets, and operational vulnerabilities—before offering policy implications for integrating microfinance with livelihoods, skilling, market linkages, and digital rails. The study concludes that microfinance is a necessary but not sufficient driver of rural development: its impact is maximized when credit is bundled with capability building, social intermediation (through SHGs and federations), and convergence with public schemes (NRLM, MGNREGS, PMEGP, and value-chain programs).