Evaluating the Role of Microfinance in Addressing Economic Vulnerability Among Women in India’s Informal Economy

Informal employment remains a defining feature of India’s labour market, accounting for close to 90% of the workforce, though estimates vary by definition and period. Women engaged in informal employment face particular economic vulnerabilities arising from unstable incomes, limited social protection and restricted access to formal financial services. This paper uses a structured secondary-source literature review to evaluate the extent to which microfinance can reduce these vulnerabilities. It distinguishes between short-term financial inclusion, including improved credit access, liquidity and income-generating opportunities, and long-term economic transformation, reflected in sustained income growth, enterprise expansion, asset accumulation and greater economic agency. The evidence suggests that microfinance can meaningfully improve financial access and short-term economic resilience. However, these benefits do not consistently translate into long-term transformation because of repayment pressures, limited enterprise growth and persistent structural and gender-based constraints. The paper therefore concludes that microfinance is more effective as a mechanism of financial inclusion than as an independent solution to long-term economic vulnerability.