Effectiveness of Microfinance Under SGSY Scheme to Reduce Poverty and Vulnerability of Rural Households : A Natural Experiment

This paper shows that the Government of India supported microfinance program under Swarnajayanti Grameen Swarojgari Yojana (SGSY) scheme is partially effective in reducing poverty of the rural households. Here, a few expansions in the National Rural Employment Guarantee scheme play the supportive role. Taking the help of Natural Experiment, it is also proved that the microfinance program is also able to reduce the vulnerability of the rural participating households. This is done through constructing vulnerability index. The social factor, i.e., enhancement of empowerment of the participating Self-Help Group (SHG) members, all of whom are women, under SGSY scheme between the concerned time period and size of microcredit taken for income generating activities, plays a significant role in reducing the vulnerability of the participating households under this microfinance program