DOES MICRO FINANCE ALLEVIATE POVERTY? EVIDENCE FROM RURAL AREA OF EASTERN PROVINCE IN SRI LANKA

Abstract

Poverty is widespread and complex in both developing and undeveloped countries, encompassing both economic and non-economic dimensions. The study's findings provide a detailed comprehension of the influence of microfinance on reducing poverty in Sri Lanka. The data collection involved a comprehensive questionnaire completed surveys due to time and feasibility constraints. Furthermore, incorporating descriptive, correlation, and regression analyses into the study adds a layer of depth. According to the regression results, it was discovered that microcredit had a substantial impact on the entrepreneurial performance of women, resulting in a notable improvement of 24.1%. Education, training, and technological development are important factors that significantly influence the business environment for individuals who receive microfinance. Furthermore, the study emphasizes the significant effect of microcredit in reducing poverty in households, showing a remarkable 26.8% impact. Nevertheless, this impact is accompanied by a multitude of contributing elements, such as knowledge, health, and the current economic circumstances. Significantly, when contrasting experienced clients, with new and prospective clients, a noticeable disparity becomes apparent. Mature clients observe more significant enhancements in mitigating household poverty, highlighting the enduring beneficial outcomes of continuous involvement in microfinance initiatives. Although microcredit has a good relationship with the overall level of life for both categories, the study suggests that there is not a significant association with poverty reduction, particularly for recent and incoming clients. This highlights the significance of continuous and well-informed involvement with microfinance efforts in order to maximize their effectiveness in reducing poverty. These findings not only enhance the scholarly comprehension of microfinance but also provide practical guidance for policymakers and practitioners aiming to maximize the efficiency of such programs in various socio-economic settings.