A scoping review of evidence of the livelihood and welfare impact of microfinance institutions’ financial inclusion schemes and programs in developing countries

Abstract

Microfinance institutions (MFIs) are major providers of financial inclusion tools in developing countries, serving small and medium-scale enterprises (SMEs) and low-income individuals and households. However, there are concerns about MFIs shifting from their social outreach goals towards profit-making ventures. This scoping review searched seven databases for studies published between January 2018 and January 2024, identifying 36 relevant studies. As this is a scoping review, formal quality assessment was not undertaken. The review examines the impact of MFIs' financial inclusion programs on beneficiaries' livelihoods and welfare in developing nations. It analyses the relationship between small and micro-enterprise finance and the achievement of social outreach objectives. Findings indicate that the reviewed literature consistently reports a tension between social outreach and financial sustainability, with many studies suggesting that MFIs often prioritise financial profitability. The review also notes the presence of Islamic Microfinance Institutions in the literature, though research on them remains limited (Only 3 of 36 studies). Recommendations include a more client-centric approach for MFIs, further research into the long-term outcomes of microfinance financial inclusion schemes combined with business growth training, and more impact evaluation research on MFI schemes in developing countries, including cross-country and cross-regional comparisons.