The Role of Microfinance in Promoting Economic Resilience in Developing Countries

Abstract

Developing countries often face economic instability, institutional weaknesses, and poverty, which limit their capacity to withstand and recover from crises. In this context, microfinance has emerged as a key strategy to enhance economic resilience by providing financial services to underserved populations. This study employs a Systematic Literature Review (SLR) of several peer-reviewed articles published between five-year to examine how microfinance contributes to resilience outcomes such as income stability, asset accumulation, and recovery from shocks. Findings indicate that microfinance can support entrepreneurial activity, especially among existing business owners and women, while also promoting financial inclusion. However, its impact varies based on client characteristics, program design, and socio economic context. Criticisms include limited effects on long-term poverty reduction and risks of over-indebtedness. The review underscores the need to integrate microfinance with capacity building and regulatory oversight to maximize its role in fostering sustainable resilience. Future research should explore its effectiveness in post-crisis and fragile settings.