Multidimensional Critique of Microfinance Institutions in Poverty Alleviation: A Literature Review in the Indonesian Context

Abstract

This study critically examines microfinance schemes through a comprehensive literature review focusing on economic, social, and gender dimensions. Although positioned as a promising innovation in global poverty alleviation, there is a significant gap between theoretical expectations and the reality on the ground. This study uses a literature review method to synthesize findings from 15 reputable scientific journals from 2014 to 2026, obtained from various databases. The results show that economically, microcredit can increase the operating profit of MSMEs through the addition of productive assets, but often fails to create new jobs due to the tendency of customers to utilize family labor for efficiency or even use credit for refinancing. In the social and gender dimensions, microfinance has proven effective as an instrument for women's empowerment through a group model that integrates local cultural and moral values. Furthermore, the challenge of mission drift between institutional profitability and social mission can be bridged through the adoption of digital technologies, such as QRIS and mobile banking, which can drastically reduce operational costs. This study concludes that microfinance in Indonesia remains an appropriate instrument if managed through an integrative strategy that balances technology-based business efficiency with intensive social assistance to achieve broader and more inclusive impacts.