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Women Empowerment Through Microfinance Services

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The UN commission on status of women observed ‘ women who contribute half of the world’s population by virtue of an accident of birth, perform two-thirds of the world’s work, receive one-tenth of its income and owns less than one-hundredth of its property’. In India, women produce 30 percent of all food commodities consumed but get only 10 percent of the property or wealth of the country. Women have been deprived of economic independence. The empowerment of women considered as an active process enabling women to realize their full identity and power in all spheres of life. Against the background of the patriarchal system of society, the women need special attention to ensure their development and participation in the decision making process at home, in the community and governance. Hence what is needed is a conducive environment to maximize their potentials. This conducive environment should include basic amenities such as better health and nutrition, education and sensitization to their rights and protection under the law and employment opportunities, etc. Over the decades, various strategies have been adopted to empower rural women with some mixed results.

One of the viable strategies, quite often talked about, is the role of enterprise to empower rural women. For example, promotion of rural enterprise makes full use of family labor, requires less capital in production and uses locally available raw material. In addition, family ties and kinship linkages may help in promoting rural enterprise. Thus, enterprise development has been considered, among other factors, a powerful tool to eradicate poverty especially among rural women as they are at the lowest rung of poverty ladder in almost all Afro-Asian countries. Microfinance lending is often focused on women for a number of reasons. First, there is a growing body of evidence that gender inequalities in developing societies inhibit economic growth and development. The greater the level of gender-based discrimination in a given society, the more likely the society is to experience higher levels of poverty, stagnant economic growth, and weaker governance.

Additionally, those within societies where gender discrimination is the greatest tend to also have a lower standard of living.3 Women are disproportionately represented among the world’s poorest people. Some advocates assert that increasing women’s access to microfinance services will enable women to make a greater contribution to household income. This, in turn, will translate into improved standards of living. Moreover, because women have fewer resources available to them, they tend to be more vulnerable when economic challenges or unforeseen circumstances arise. By providing access to loans for income-generating activities, microfinance institutions can significantly increase a woman’s resources, thereby reducing her overall vulnerability. Furthermore, it is well-documented that women are more likely than men to spend their income on household and family needs.4 Assistance to women has therefore been shown to generate a multiplier effect that improves the welfare of the whole family. Women self-help groups:

One of the powerful approaches to women empowerment and rural entrepreneurship is the formation of Self Help Groups (SHGs) especially among women. This strategy had fetched noticeable results not only in India and Bangladesh but world over. “Women self-help groups are increasingly being used as tool for various developmental interventions. Credit and its delivery through self-help groups have also been taken as a means for empowerment of rural women.5 this integrated approach, whereby, credit is only an entry point, and an instrument to operationalise other aspects of group dynamics and management, also caters to the need for social intermediation of these groups. A self-help group is conceived as a sustainable people’s institution that provides the poor rural women with space and support necessary for them to take effective steps towards achieving greater control of their lives.

The SHG approach has proved successful not only in improving the economic conditions through income generation but in creating awareness about health and hygiene, sanitation and cleanliness, environmental protection, importance of education and better response for development schemes. Informal self-help groups in rural areas serve to empower women, and provide a basis for the provision of credit and other support for various production and income-generation activities. These activities usually include garment making, embroidery, food processing, bee keeping, basketry, gem cutting, weaving, and knitting. Organizations for the Women and by the Women

There are many successful women forums and organizations that are trying to bring the rural women together for developmental works. The examples that we will take are Working Women’s Forum (WWF), SEWA, Shri Mahila Griha Udyog Lijjat Papad, or Lijjat, and Mann Deshi Mahila Sah Bank Ltd., Mhaswad, Maharashtra. The Working Women’s Forum (WWF), established in Madras in 1978, has brought together over 13,000 poor urban women around the issue of credit. Most women who live in the slums of Madras work as small-scale traders and vendors, their earnings often providing over half the family income. Interviews with these women revealed that their primary concern was increasing their earning capacity. The WWF was set up to enable these women to obtain low interest loans to expand their businesses. The key element in the WWF structure is the neighborhood loan group, comprised of 10-20 women from the same area who act as mutual guarantors for the loans of all group members.

Over 7000 women have received loans and the repayment rate has been over 90%. About 2800 new jobs or businesses have been created, and earnings have increased an average of 50% in existing enterprises. Women report that they are eating better quality and more varied foods as a result of their increased income. The WWF is expanding its activities to address the political and social problems of working women as well. The Forum operates day care centers, skills training centers, and remedial classes for schoolchildren. In 1980 the WWF launched a family planning program in which field workers (who are drawn from the WWF membership and paid $18 per month) disseminate information on health, nutrition, and family planning to families in their communities. According to a staff member, this program was an outcome of the realization that “income generation and large families do not go together.” The WWF also promotes intercaste, no dowry marriages and lobbies for public services. Women have become more confident of the possibility of gaining control over their lives, including their fertility.

The Self-Employed Women’s Association (SEWA) is an Ahmadabad-based union of women workers established in 1972. Backed by more than 220,000 association members and has set up 16 organizations, including the SEWA bank has organized to fight poverty through full employment and self-reliance, SEWA workers demand the right to work for food, income, and social security. Shri Mahila Griha Udyog Lijjat Papad, or Lijjat, ‘is an organization that has acted as a catalyst in empowering poor urban women across India during the last four decades. Starting as a small group of seven women in 1959, today Lijjat has more than 40,000 members in 62 branches across 17 Indian states. Only women can become members of Lijjat, and all of its members, addressed as “sisters,” own the organization. Lijjat’s main product is a thin, round, savory snack called papad, and papad rolling is the major activity of the “member sisters.” Remuneration is the same for everyone, and profits and losses are shared equally among the member sisters, so there is no possibility of concentration of assets and wealth. Besides papad, Lijjat has also introduced other products, such as Sasa detergent and soap.

However, papad has remained as its core identity product. Mann Deshi Mahila Sah Bank Ltd., Mhaswad, Maharashtra,(MDMSB) founded in 1997 is the first rural women financial institution which received a banking license from RBI where 100% of its clients were women having annual incomes averaging US$400. It is also the first bank in the country to have more than 2000 members from backward castes. The bank is having more than 47000 clients (2005 figure) ranging from street vendors to shepherds to wage earners to small entrepreneur women. The bank estimated that by 2008, it will reach 270000 clients. It has its integrated approach which distinguishes it from other micro credit efforts. It Credit though very important is not adequate for sustained and substantial employment.

It is becoming increasingly clear that access to financial services alone is not enough for poor people to transfer their economic activities into profitable economic enterprises. Access to market, information, and technical knowhow and social support services are as important as money if the poor are to share in economic growth. If poor people are going to build incomes, assets and livelihood in substantial ways, they need access to:

• Market information and commercial linkages
• Health and social security services, such as insurance and pension
• Technology and method to improve productivity
• Representation at Gram-Panchayat level governing bodies
• Equipment & supply know-how, linkages and bargaining power

Women are not bankable because of the lack of assets in their name, and that perpetuates the cycle of poverty for them. And when a family acquires an asset, it is rarely put in the woman’s name. Thus, asset ownership is a priority for MDMSB. An asset right is fundamental in women’s financial and social security. Each MDMSB loan program is designed to help women transfer family assets into her name. This includes making transfers in the woman’s name for agricultural land and houses, and the acquisition of tools, shops and livestock, bank accounts, shares and savings certificates. Other Major initiatives for women empowerment

Women in the rural areas are the catalyst of change and that is why its whole programme keeps women in progress. In the women’s savings movement, rural women organized themselves into ‘thrift and credit’ groups with one rupee saving a day and this mass movement, in which 58 lakh members saved more than Rs.800 crore is rotated internally and lent amongst members twice in a year as per the interest rates fixed by the groups. While the savings was there among the SHGs, there was no channel of investment. Now HLL has provided a window of opportunity to invest and earn. HLL’s Project Shakti – Through a combination of micro-credit and training in enterprise management, these women from SHGs have turned direct-to-home distributors of a range of HLL products and helping the company plump hitherto unexplored rural hinterlands. Project Shakti was piloted in Nalgonda district in 2001. The ambitious vision of this project is to create by 2010 about 11000 Shakti entrepreneurs covering one lakh villages and touching the lives of 100 million rural consumers. On an average the Shakti entrepreneur is earning a return of 8%.

HLL operates I-Shakti an IT-based rural information service that will provide solutions to key rural needs in the areas of agriculture, education, vocational training, health and hygiene.6 ‘Gangai Vattara Kalanjia Mutuals’ – a mutual trust, aims at providing social security services to the poor in rural areas. It draws inspiration from the Mutual Insurance Association of Netherlands (MIAN). A unique feature of the insurance cover is that all claims are settled within hours, sans much of the paper work. As a new venture, SHG members are entering the arena of health, especially in identifying hearing impaired persons by joining hands with project Shakti of HLL and affordable hearing aid project centre.

SHGs took an important step towards financial independence by attending 12- day training programme on setting up information kiosks. After training the women on basic computing skills besides operating photocopiers and fax machines, Tamil Nadu Corporation for Development of Women Limited (TNCDW) will offer financial assistance to the women. The special schemes from government and financial institutions to assist women in creating enterprises and the conducive platform provided by the X plan by virtue of its thrust on women’s social and economic empowerment and gender justice. Microfinance and Women Empowerment

Links between microfinance and women’s empowerment are viewed as optimistic, limited by design, cost effective in eliminating poverty, and a misplaced diversion of resources. Microfinance programs range from small scale self-help groups to large poverty-targeted banks. One model may vary in delivery, group functions and structures, and complementary services. There could be three contrasting approaches to microfinance and women’s empowerment: the financial sustainability approach, the integrated community development approach, and the feminist empowerment approach. However, program evaluations revealed the need to question the assumptions underlying all three approaches. In most programs, women benefited to a limited degree.

Many women did not control the loan use. Most women were engaged in low paid, traditionally female activities, and increases in income were small. Resources and time invested in economic activity were limited by responsibility for household consumption and unpaid domestic work. Microfinance programs sometimes created domestic tension between spouses and loss of spousal income and support. Group repayment pressures sometimes created pressures between women. Many women focused on personal rather than social objectives. Financial Services for the Rural Poor:

Microfinance, the provision of a wide range of financial services to the poor on a sustainable basis, has proved to be immensely valuable.7 Access to financial services has allowed many families throughout the developing world (and, indeed, in poorer parts of the developed world) to make significant progress in their own efforts to escape poverty. It has become clear that poor need access to money to send their children to school, to buy medicines; they need financial services to reduce their vulnerability. As a result, worldwide, MFIs have started developing and delivering a range of financial products. This reflects Millennium Development Goals (MDGs) that offer broadly accepted, measurable indicators of poverty reduction that are focused on poverty, education, health and empowerment.

International year of Microcredit 2005’s fact sheet, Microfinance and the Millennium Development Goals, notes that a review of microfinance literature points to several specific conclusions about its impact on poverty reduction and several other MDGs. Some of them are highlighted here: a) Shahidur R. Khandker’s 1998 seminal study for the World Bank notes that, ‘In Bangladesh, 5 % of the Grameen bank’s clients graduated out of poverty every year by participating in microfinance programmes and, more importantly, households were able to sustain these gains over time.8 b) Save the Children’s 1999 study in Honduras showed that microfinance clients increased earnings, which enabled them to send their children to school. c) Women empowerment programme in Nepal found that 68% of its members were making decisions on poverty, family planning and daughter’s education, and also negotiating their children’s marriages. d) Microfinance contributes to improved nutrition, housing and health, especially among women clients.

Access to a wide range of financial services can have significant positive effects on a wide variety of manifestations of poverty. The new vision driving the microfinance industry is for a world in which all poor have permanent access to a wide range of financial services, delivered through a variety of convenient mechanisms by different types of institutions. Financial services for the poor includes besides microcredit, other services like savings, money transfers, remittances, and insurance. As in India, these service providers include savings and credit cooperatives, commercial banks, community finance institutions, NGO-MFIs, consumer credit companies, insurance companies, and other types of institutions including the private sector companies. E-Banking and other emerging technologies offers a huge opportunity in this sector which resulted in growing number of commercial financial institutions initiating efforts to serve the low income market.9 Conclusion:

There are many studies that provide insights into the impacts of Micro-credit and/or Microfinance on poverty alleviation and the empowerment of women. Some of the notable studies were ‘Towards Women’s Empowerment And Poverty Reduction: Lessons From Andhrapradesh South Asia Poverty Alleviation Programme; Micro-Credit And Women’s Empowerment: A Case Study Of SHARE Microfinance Limited; Social Mobilization And Micro-Credit For Women’s Empowerment: A Study Of The DHAN Foundation; Awareness, Access, Agency: Experiences Of Swayam Shikshan Prayog In Micro-Finance And Women’s Empowerment; Micro-Credit And Women’s Empowerment: The Lokadrusti Case; and Social Mobilization And Micro-Finance For Women’s Empowerment-Lessons From The ASA Trust’.

These studies concluded that there is no linear relationship between the three. Collective strategies beyond micro-credit to increase the endowments of the poor/women enhance their exchange outcomes vis-à-vis the family, markets, state and community, and socio-cultural and Political spaces are required for both poverty reduction and women empowerment. Even though there were many benefits due to micro-finance towards women empowerment and poverty alleviation, there are some concerns. First, these are dependent on the programmatic and institutional strategies adopted by the intermediaries, second, there are limits to how far micro-credit interventions can alone reach the ultra poor, third the extent of positive results varies across household headship, caste and religion and fourth the regulation of both public and private infrastructure in the context of LPG to sustain the benefits of social service providers.


1. Susy Cheston and Lisa Kuhn. “Empowering Women through Microfinance.” UNIFEM. Paper Submitted to Microcreditsummit-5. (2002), 7. 2. Zeller.M(2000).“Product innovation for the poor: The role of microfinance”, Policy Brief No 3. Susy Cheston and Lisa Kuhn. “Empowering Women through Microfinance.” UNIFEM. Paper Submitted to Microcreditsummit-5. (2002), 7. 4. Linda Mayoux. “Reaching and Empowering Women — Gender Mainstreaming in Rural Finance: Guide for Practitioners.” (IFAD Rome April, 2009) 5.
‘SHGs help to promote women entrepreneurship’ The Hindu, Jan 24, 2005 6. ‘Where HLL Shakti comes from’, The Hindu Business Line, May 29, 2003 7. ‘Microfinance: Banking for the poor and not poor banking’, The Hindu Business Line, Mar 15, 2005. 8. Khandker, Shahidur R and World Bank, “Fighting poverty with microcredit: experience in Bangladesh”. Oxford University Press, 1998. 9. ‘Micro Credit: Looking beyond group lending’, The Hindu Business Line, April 14, 2006.

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