Impact of Microfinance on Self-Help Group (SHG) Performance: A Structural Equation Modeling and Regression Analysis Approach

Abstract

Microfinance has been a key driver of financial inclusion and economic empowerment, particularly through Self-Help Groups (SHGs). This study investigates the impact of microfinance on SHG performance in Chennai by integrating Multiple Regression Analysis and Structural Equation Modeling (SEM). The study evaluates key socio-economic dimensions, including credit access, savings mobilization, skill development, cooperation, poverty alleviation, women empowerment, economic growth, and social welfare.

A two-stage analytical approach is employed: first, Multiple Regression Analysis assesses the direct effect of microfinance on SHG performance. Next, SEM is used to examine mediating relationships among the identified dimensions. The SEM results reveal that microfinance positively influences SHG performance, with women empowerment and skill development acting as significant mediators. The model fit indices confirm the robustness of the proposed framework.

The study provides empirical insights into the role of microfinance in enhancing SHG effectiveness and contributes to policymaking by identifying key intervention areas for financial institutions and development practitioners.