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1. INTRODUCTION
Microfinance is a type of banking service that is provided to unemployed or low-income
individuals/groups who would otherwise have no other means of gaining financial services.
Rural micro-financing is defined as “all financial services that are accessible to poor and low-
income rural households and individuals” (IFAD 2009).
The core function of a microfinance program is to provide financial services, to reach poor
women and men and give them access to savings and credit. However, the potential of
microcredit goes beyond the provision of financial services to poor and vulnerable people.
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This critique is well reflected in the three paradigms of women’s empowerment through
microfinance: (i) feminist empowerment paradigm; (ii) financial self-sustainability paradigm;
and (iii) poverty alleviation paradigm (Mayoux 2005, 2006). Gender equality is an essential
component of economic growth, enabling women to become more effective economic actors
(Klasen 2002). Women have not only often proved to be better re-payers of loans, but also better
savers than men, and more willing to form effective groups to collect savings and decrease the
delivery costs of many small loans. Women, at all levels of society, are an under-served and
under-developed while working continuously for the family in the name of social norms and
trends unpaid. But the contrast is that, apart from extremely poor women – they also make a
potentially profitable market (Cheston 2006). At least, presence of a female figure in all the
possible products’ advertisements tries to prove the same. Of course, this world loses all colors
and beauty of life when conniving at women’s presence.
Another view of women’s empowerment argues that it needs to occur in multiple dimensions
that is economic, socio-cultural, familial or interpersonal, legal, political and psychological
(Malhotra et. al, 2002). These dimensions cover a broad range of factors, and thus women may
be empowered within one of these sub-domains. For instance, the socio cultural dimension
covers a range of empowerment sub-domains, such as marriage systems, norms regarding
women’s physical mobility, non-familial social support systems and networks available to
women.
Women like men who are confident, make good livelihood and household decisions, have
control of resources and can use larger loans effectively to increase their incomes, are potentially
very good long-term clients. They can accumulate substantial savings and use a range of
insurance and other financial products. They can also pay for services that benefit them. The
experiences of empowerment and disempowerment are related not just for material means and
interventions, but also to social relationships (Kabeer & Haq 2010; Sardenberg 2010a), voice
(Goetz & Nyamu Musembi 2008), choice (Kabeer 2008) and negotiations (Huq 2010; Johnson
2010).
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Fig 1: A sample frame-work of microfinance
In microfinance, key players are National Bank for Agricultural and Rural Development
(NABARD), Reserve Bank of India (RBI), Self Help Groups (SHGs), Microfinance Institutions
(MFIs), Non-Government Organizations (NGOs). Some popular microfinance companies have
been shown in Table 2.
There are two models of micro-finance in India that link the formal financial sector with lending
to low-income households that cannot afford collateral.
1. The first is the bank-led SHG model, promoted by the State through commercial banks,
which lends to groups of 10 to 20 women called the Self-Help Groups (SHGs)
2. The other model is that of micro-finance institutions (MFIs) and are private sector entities
lending to small groups similar to the SHGs.
3
Both are based on the joint-liability-group (JLG) method.
4
Graph 1: Growth in number of MFI-Bank Linkage Program
900
800 779
700
600 581
518
500 471 465
400
300
200
100
0
2007-08 2008-09 2009-10 2010-11 2011-12
No of mFIs
5
16,000.00
14,000.00 13394.25
12,000.00
10,000.00 9292.74
8,000.00
6,000.00 5444.71
3732.33
4,000.00
1970.15
2,000.00
0.00
2007-08 2008-09 2009-10 2010-11 2011-12
Rs Cr
No of SHGs
6
8000
7016.3
7000 6551.41
6198.71
6000 5545.62
5000
4000 3785.39
3000
2000
1000
0
2007-08 2008-09 2009-10 2010-11 2011-12
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Source: Oxford Policy and Human Development Initiatives 2010. Country Briefing India.
http//www.ophi.org.uk/wp-content/uploads/country-brief-India.pdf
3. REVIEW OF LITERATURE
Sen (1990) commented that personal and collective empowerment is intrinsically linked because
without the latter, the former becomes circumscribed. The study of Bali-Swain (2006) explained
the feminist paradigm; empowerment goes beyond economic betterment and well-being to
strategic gender interests.
According to Singh (2008), microfinance services are designed to help the underprivileged to
increase their earning, consolidate their properties and even gain a decent financial stability in
life. The advantage of availing the microfinance credit over the more traditional means is the
unwillingness of the later to serve the underprivileged people.
Allen et al (2007) found that In spite of a large banking sector, about 40% of the Indian
population does not have bank accounts. Given that over 75% of the Indian population still
lives below $2 a day, and a vast majority in rural areas, microfinance – the provision of thrift
savings, credit and other financial products and services at a very scale to the poor to enable
them to raise their income and improve living standards – is key to financial inclusion in India.
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Shastri (2009) showed that the dynamic growth of the microfinance industry has been promoted
not only by market forces but also by conscious actions of national governments, Non-
Governmental Organizations (NGOs), and the donors who view microfinance as an effective
tool for eradicating poverty.
Mayoux & Hartl (2009) said that microfinance has been seen as contributing not only to poverty
reduction and financial sustainability, but also to a series of ‘virtuous spirals’ of economic
empowerment, increased well-being and social and political empowerment for women
themselves, thereby addressing goals of gender equality and empowerment.
Cheston & Susy (2006) found that in many MFIs, women have become preferred clients as their
income benefits their families through improved nutrition, health, education and well-being;
because they have higher repayment rates; and because women work better in the group lending
programmes that makes reaching the poor efficient.
Swainan and Fan (2009) strongly concluded in their study that SHG members were empowered
by participating in microfinance program in the sense that they could have a greater propensity to
resist existing gender norms and culture that restrict their ability to develop and make choices.
Mahajan & Bansal (2009) showed that the impact of microfinance on women empowerment in
Punjab and found that participation in microfinance program have not only significantly
increased income, but has also developed regular saving habits among women. As a consequence
of their economic empowerment, women could actively participate in household decision
making, besides enhancing their social and psychological empowerment.
Anjugam & Alagumani (2001) concluded that microfinance has brought considerable
improvement in decision making skills among women, gave them confidence in managing the
financial crisis of the family, decision making capacity in household matters and assertiveness in
protesting against social evils like drinking water problem, dowry and gambling etc.
Emerlson (2011) found that the impact of microfinance programme especially through Self-
Help Groups (SHGs) has been effective in making positive social change to all members,
irrespective of the direct borrowers of the micro credit. Therefore, microfinance is a new
method to meet the credit requirement in rural areas. It is being viewed as one of the most
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powerful tools for uplifting the economic conditions of the asset-less poor through group
approach that ensures active participation and involvement of the beneficiaries in effective
implementation of the programme.
Pitt & Khandker (1998) studied the impact of microfinance on poverty in Bangladesh. The
study showed that the poverty rate of BRAC (Bangladesh Rural Advancement Committee, set
up in 1970) members fell by around 15 per cent for moderate poor and 25 per cent for ultra
poor. This rate of poverty reduction appeared to decline with the duration of membership and
with cumulative loan size.
Dhanya & Sivakumar (2010) commented that in spite of the improvements in savings and
banking habits due to the participation in microfinance programmes, the problem of default is an
important issue, affecting the sustainability of the SHGs.
Cull et al. (2008) found that there is a remarkable success in maintaining high rates of loan
repayment in microfinance sector, but their study also suggests that profit-maximizing investors
would have limited interest in most of the institutions that are focusing on the poorest
customers and women. Those institutions, as a group, charge their customers the highest fees in
the sample but also face particularly high transaction costs, in part due to small transaction
sizes.
Sriram & Upadhyayula (2004) concluded that there is no ideal or easy path for Microfinance
Organisations to mainstream in India. They argued that there should be regulatory changes that
allow smaller MFOs to get into more complex forms as to grow organically.
Ghate (1992) says that Informal sector microfinance institutions have comparative advantage in
terms of small transaction costs achieved through adaptability and flexibility of operations.
A study by Jyotish (2006) based on 100 SHG members in the Hooghly district, West Bengal
found that women who had taken loans for income- generating activities, only 5% reported
having total autonomous control over the money, 56% reported that they share control over the
loan money with their husbands, and 38% reported that their husbands have sole control over the
proceeds of the loan. The above conclusion shows that micro finance program does not explain
the strong form of Women empowerment rather it is weak form of women empowerment.
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Hashemi et al. (1996) for example, attempt to measure a woman’s empowerment using
indicators such as level of mobility, ability to make large purchases, and political and legal
awareness. However, in other studies, such as Goetz and Sen (1996) and Rahaman (1999),
evidence is offered that a woman’s participation in a credit program reinforces her dominated
role in the household, and in some cases, the loan ends up under the control of her husband.
Ranjula & Fan (2009) in their article ‘Does microfinance empower women? Evidence from self-
help groups in India’ concluded that SHG members are empowered by participating in
microfinance program in the sense that they have a greater propensity to resist existing gender
norms and culture that restrict their ability to develop and make choices.
Sarumathi & Mohan (2011) found that microfinance brought psychological and social
empowerment than economic empowerment. Impact of micro finance is appreciable in bringing
confidence, courage, skill development and empowerment. The SHG members feel free to move
with their groups and leaders. It leads them to participate on various social welfare activities with
good co-operation.
4. OBJECTIVES
1. An overview of Microfinance in India
2. To know the role of Microfinance in women empowerment
3. To identify the opportunities and challenges of MFI in India
5. RESEARCH METHODOLOGY
This is a descriptive type of research. Secondary data collected from different sources has been
used. More focused has been given on review of literature to support the findings. With the help
of simple calculation, graphs and tables the researcher tried to explain the facts.
6. ANALYSIS
From the reviews it is found that women’s empowerment means empowerment of women in
multiple dimensions: economic, socio-cultural, political and psychological. This study focused
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on literacy rate, per-capita income, gross domestic saving, life expectancy and infant mortality
rate and one the basis of that the finding of the study has been elaborated.
Graph – 6: Literacy Rate of India
Literacy Rate
Male Female
65.46
53.7
39.3
29.8 74.04
64.8
22 52.2
15.4 43.6
34.4
8.9 28.3
18.3
12
Per-capita Income
40000
35000
30000
25000
20000
Rupees
15000
10000
5000
0
1 1 1 1 1 1 9 0 1 2
0 -5 0 -6 0 -7 0 -8 0 -9 0 -0 8 -0 9 -1 0 -1 1 -1
1 95 1 96 1 97 1 98 1 99 2 00 2 00 2 00 2 01 01
20
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the reasons that the gross domestic saving of India went down in 2011-12. It may be inferred
that microfinance is an important factor which influences gross domestic rate. Allen 2005;
Murray and Rosenberg 2006; Ashe &Parrott 2002 and Cheston 2006.
Graph – 9: Life Expectancy of Indians
Life Expactancy
80
70
60
50
Years
40
30
20
10
0
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11
Graph-9, shows that the life expectancy of Indians are increasing regularly. And after 1990 the
expected life of women are more than that of male, which indicates that they are taking good
nutrition, availing medical facilities, It can be concluded that the income of women have
increased which helps them to take regarding health. From the graph-10, it is also found that
the infant mortality rate in India is decreasing which again indicate the awareness and income
level of individuals. Cheston & Susy (2006)
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Infant Mortality Rate
160
140
120
100
Per thousand
80
60
40
20
0
2009 2010 2011
7. Conclusion
In India MFIs and SHGs are the main players in microfinance. It is also a fact most of the MFIs
are profit oriented and they are charging a high interest rate from their clients. SHGs are doing
well but there is a need to educate SHGs group members, how to utilize the funds properly.
The present study found that the literacy rate, per-capita income, gross domestic saving, life
expectancy rate and infant mortality rate are improving continuously. It is observed that after
1990 the rate of improvements is higher than before 1990. On the other hand studies showed that
in Indian microfinance started during 1985 and it keeps penetrating most of the part of the
country. It may be inferred that microfinance is an important factor in improving the social
indicators like literacy rate, income, saving, life expectancy and infant mortality rate. It may be
conclude that microfinance plays a significant role in women empowerment.
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