Microfinance and Poverty Alleviation: The Socio-Economic Contribution of SILC, a Savings-Led Microfinance Programme in Semonkong, Lesotho

Abstract

Microfinance has garnered significant attention in development discourse due to its acclaimed potential to reduce poverty. Its role as a poverty reduction tool, however, has yet to be thoroughly examined. A single case study was undertaken through interviews and observations involving 30 Savings and Internal Lending in Communities beneficiaries in Semonkong, Lesotho. The rural populations in Lesotho face poverty due to, among other reasons, a lack of access to microloans necessary for alleviating poverty. The study’s outcome sheds light on the phenomenon of community-led microfinance programme and analyses their contribution to the livelihoods of those living in rural communities. The study found that savings-led microfinancing has effectively increased household incomes among those participating in it thereby amplifying consumption and access to basic needs. Small loans have further facilitated the establishment of small businesses and the acquisition of assets necessary to curb poverty. While there are some negative consequences associated with participating in this activity, the study found that overall the positive impacts outweigh the negative ones. We, therefore, recommend the promotion of savings-led microfinancing as a poverty alleviation tool and envisage that the findings of this study will stimulate policy dialogue and promote advocacy for rural financial inclusion.