In this way the operational costs of microfinance have reduced and it becomes possible to give poor people loans that would otherwise not be available or at least would not be available at such low interest rates. The group lending methodology thus increases social capital and efficiency.
Effect on poverty and economic development With innovative concepts such as group lending it is possible to give poor people access to credit. An obvious next question is: what does this credit do for them? Can people actually improve their living standards with the help of micro credit? There are basically two ways to answer this question.