The Economic and Environmental Outcomes of Microfinance Projects: An Indian Case Study

Microfinance projects now seek to achieve improvement in environmental quality in addition to poverty alleviation. Achievement of these goals may depend upon the economic and environmental impact of microfinance businesses. This study is a quantitative analysis of these outcomes for Ecodevelopment, an Indian microfinance project, which aims to prevent forest degradation by poverty alleviation. The study divides businesses into perishable goods, non-perishable goods, simple skills, and special skills and measures their economic outcome by two indicators, repayment percentage and continuity of businesses. The study examines the effect of loan amount on the economic outcome of businesses. To quantify the environmental outcome, it analyzes the use of firewood or fodder and release of pollutants by businesses. The results show that loan amount does not affect the economic outcome, special skills have best performance, and skills cause less pressure on forest resources. These results suggest the need for development of knowledge-intensive skills, involvement of institutions in the operations of business, and inclusive policies for protected area management.