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Microfinance challenges: empowerment or disempowerment of the poor?

Isabelle Guérin
Jane Palier

Part I - Questions as to definition: what is understood by empowerment?

1. ‘Engendering’ microfinance

Meera Sundararajan

Texte intégral

1It has been estimated that India has 37% of the world’s population earning less than $ 1 a day, of which 60% are women (Human Development Report 2003). This manifests itself in the form of illiteracy, limited access to basic needs and growing health problems. Most of the deprivation comes from lack of access to economic resources as well as being subordinated at the level of the family, community and the socio-political arena. The first International Women’s Conference in Mexico in 1975 gave particular emphasis to credit as a means for women’s empowerment.

2Today, after three decades, microfinance in the country forms a part of almost all development intervention targeted at poverty alleviation. Government-led poverty alleviation programmes such as the Swarnajayanti Grama Swarojgar Yojna (SGSY) and the Rashtriya Mahila Kosh implement their programmes through microfinance interventions. Non-governmental organisations (NGOs) integrate this component into almost all their interventions.

3However, the formation of microfinance groups is a difficult and costly process that is often dependent on external funding in the form of a grant. The process of linking the group to the bank is also a tedious one, testing the patience of the group members who have little incentive to continue being part of the group. Grant funds, too, are limited. All this has led to the changing role of NGOs from social intermediaries to financial intermediaries.

4In this context, there are a number of issues and challenges facing the sector. Considering the fact that a large majority of microfinance “clients” are women, the sector is often chided for not looking at questions relating to their empowerment. The microfinance sector in itself appears to be unsure about its own positioning – whether to view itself as a developmental tool or as a financial one. While there are a number of organisations that play the roles of both social and financial intermediaries, they are often not able to do justice to both, and the financial role is usually given priority.

5There has been considerable gap between the demand and supply for microfinance in India. While there are a large number of poor households who eke out a living from the informal sector, the credit availability to enhance their participation and add value to their inputs is not available. The National Bank for Agriculture and Rural Banking (NABARD) bank linkage programme has achieved only 1.4% of the potential demand, reaching out to seven million households with an average credit of Rs. 2,000 a household, as against the need to reach 100 million with Rs. 10,000 a household. The microfinance institutions (MFIs) on the other hand, have been able to meet only 0.25% of the demand (Mahajan 2002). On the whole, only 2% of the entire demand is being met from the formal and the semi-formal financial institutions in the country. The challenge is therefore to expand the range of services so as to reach out to more households.

6Though the SHG model is the most prevalent in India, the Grameen model, with its financial efficiency, is often preferred by MFIs. This brings with it institutional and other model-specific constraints, which offer less scope for addressing the gender and development agenda.

7As an apex financial institution and sector leader, Friends of Women’s World Banking (FWWB) has been taking into account the above concerns and initiating strategies within its existing programmes to address the question of women’s empowerment.

1. About the role of FWWB with its partners

Box 1. About FWWB

Established in 1982, as an affiliate of Women’s World Banking, Friends of Women’s World Banking, India (FWWB) is a non-profit Trust that seeks to promote ‘direct participation of poor women in the economy through access to financial services’. It is committed to building a society based on equity and social justice where women are leaders of social change. Its strategy focuses on building the capacity of MFIs in India to provide quality financial services to larger numbers of the poor.
FWWB plays an important role in the development of institutions providing financial services to the poor and its comparative advantage lies in its ability to identify small, promising MFIs and build their capacity with funding and technical assistance to enable them to graduate to a stage where they have the systems and the capacity to become a sustainable financial institution capable of reaching a large number of poor clients.
Currently, FWWB works with 88 partner institutions that are reaching out to a total number of 1.3 million women through one or more financial products (savings, credit, insurance and pension). FWWB has disbursed a total amount of Rs. 108 crores through its partners, which has reached more than 2,60,000 women.
The other core activity of FWWB is to build the capacity of its partner MFIs and that of community-based financial institutions (SHGs/Federations), which are managed by women themselves.

8The following are some of the important criteria that guide the selection process of organisations by FWWB for partnership in its credit programme.

  • Membership – FWWB only works with organisations that reach out to poor women organised in collectives.
  • Leadership – FWWB prioritises lending to organisations that have a mandate to promote leadership of women at the grassroots and at the institutional level.
  • Scope for institution building – FWWB works with organisations that have a strong vision and mission focused on economic development of poor women, as this forms the basis for future institution building support.

9FWWB partners can be classified into three groups:

  • Big Partners: Those who have a loan portfolio of over Rs. 5 crores and an outreach capacity of 10,000 women or more. They have a clear vision and growth strategy.
  • Institutional Development Partners: These are organisations with a committed leadership, a clear strategy outlining a growth plan for the next five years, and a commitment to generating information and putting systems in place. Their outreach capacity is over 5,000 women with a potential to reach out to 10,000 or more women at the end of three years of support from FWWB.
  • General Partners: Those who need training and loan support to facilitate their entry into microfinance activities. They reach out to 500-1,500 women, and have the potential to graduate to the Institutional Development Partner category over time.

10FWWB partnerships with any new organisation begin in the General Partner category, and with training and technical assistance, the institution building processes are put into place, creating an opportunity for the concerned organisation to streamline its systems and graduate to the higher category, thus reaching out to more women.

11Institution building is undertaken through the following inputs:

  • Technical assistance: This is done at the organisational level by the FWWB programme officers, to cater to individual organisational training needs. These have been found to be more helpful in the case of organisations that have a predominantly female staff who have mobility constraints, which results in their limited participation in structured training programmes.
  • Structured training programmes: These training programmes are residential and provide the necessary capacity building inputs required. The technical assistance visits and the structured training programmes reinforce one another through forward and backward linkages.
  • Exposure visits: Opportunities for observing best practices are provided through national and international exposure visits.

2. Engendering strategies

12An assessment of the FWWB portfolio shows that more than 80% of the partners were in southern India. The approach followed in Andhra Pradesh is more financially focused, while in the case of Tamil Nadu, the approach is mainly of the “credit plus” variety. Whatever the approach, the number of members reached out to vary. In the case of the larger organisations that address both social and financial concerns, it is seen that there are two distinct entities – one, which addresses social concerns, while the financial concerns were addressed by another, complying with the recommendations of microfinance literature which stresses on the importance of segregating the social and the financial functions of microfinance. However, in the case of smaller organisations following a “credit plus” strategy, the lack of adequate manpower often resulted in the same staff having to deal with both programmes.

2.1. Building a gender perspective adapted to the partners who adopted a ‘credit plus’ approach

13One of the first steps taken was to look at a group of nine of the smaller partner organisations in Tamil Nadu, which follow a “credit plus” approach, and understand their human resource profiles and their views on women’s empowerment through microfinance, and to document the same. The rationale for selecting smaller organisations was that their staff had greater overlap in financial and social functions, and their views on women’s issues at the grassroots level was likely to give some pointers on the existing gaps in the approach followed.

14The methodology used was to develop an organisational profile by:

  • Documenting individual organisation and staff profiles in the concerned partner category.
  • Looking at the systems by which these organisations play their financial and social intermediation roles.
  • Examining their governing structures to see the level of their involvement in the activities.
  • Understanding the levels of awareness on gender and poverty issues. This was done through a focus group discussion with staff of the credit programmes, with discussion being facilitated around the following areas – understanding the need for microfinance, the social issues relating to gender and caste inequalities, institution building through microfinance, linkages with other institutions and health and education related issues.

15Below are the key findings from the study:

  • There was limited understanding about the dependence of poor families on a woman’s income.
  • Initial responses to questions on “the need to focus on women in microfinance” almost always elicited the response that women are more creditworthy. It was only on probing that other issues came out, but even here responses were rather simplistic, suggesting that with access to financial resources, social status would improve. The complex linkages between gender, society and power were not understood at all by almost all the groups.
  • The fact that economic development is only a part of the complete process of empowerment was not understood by most.
  • About the concept of women’s work – most responses could not identify non-remunerative labour as work (i.e. domestic work).
  • The need to help women do something in their “free time” was something that many suggested. This is really a serious issue that needs to be addressed because a time disposition study from a gender perspective has shown clearly that women in general have lesser leisure time when compared to men, and that microfinance programmes tend to eat into this leisure time further.
  • Regarding problems being faced by women, responses were almost always about sexual exploitation. Considerable probing helped in bringing out other issues.
  • There was limited understanding of and analysis about caste.

16Given the fact that these were responses from organisations that were also undertaking social development programmes, it was felt necessary to formulate interventions that would build a more holistic perspective about women’s empowerment, as the organisations had the scope to address these issues within their organisational framework and existing programmes.

  • 80 The module has been developed and the first round of training was conducted in February 2004.

17Based on the findings, an introductory gender-training module80 has been proposed, which would deal with

  • Sex and gender – differences.
  • Patriarchy and the socialisation process – how it impacts on gender roles and relations.
  • Reproduction and production with a focus on time-utilisation patterns of men and women.
  • Practical gender needs versus strategic gender needs, and where microfinance fits in.
  • Poverty and gender – how it affects men and women differently.
  • Access and control over productive resources – gender imbalances.
  • Areas where women have control.
  • Ability to control and influence decisions at the household level.
  • Access to services such as health and education – problems and solutions.

2.2. Building a gender perspective, adapted to the partners that adopted a financially focused model

18While financially focused models are constrained by the fact that they have no scope to implement a social intervention, FWWB has addressed this issue by promoting the development of financial products, which cater specifically to women’s needs. It started with the recognition that women face a different set of risks than men. In order to design successful products for women, MFIs need to understand the financial needs of women members and how to help them cope with their risks better. Spandana, a partner of FWWB in Guntur, Andhra Pradesh, has addressed this concern effectively, by offering different loan products, which address the different needs of women. All of them aim to reduce the drudgery of women. Spandana, which works in the urban slums of Guntur, has a large number of members who are employed as domestic workers. One of the main problems they face is lack of mobility. They often have to walk long distances from their slums to the middle class localities for employment. To address this question, Spandana designed specific loans for the women to purchase bicycles. Designed in close consultation with the user group, this loan product includes small instalments, which the woman can repay easily. In response to member demand, Spandana also arranged for gas connections and pressure cookers through easy loan instalments.

19FWWB has introduced, through its microfinance programmes, a number of insurance products, which have helped women deal better with risks such as death and loss of assets.


20While microfinance has definitely addressed the question of access to economic resources for women, the market-centred approach of financial intermediaries tends to undermine the complexity of the social systems that the clients are a part of. This, coupled with the challenge of increasing outreach, often results in its inability to concentrate much in the area of social and political interventions, which need to be put in place for better credit absorption, so as to result in the empowerment of women.

21There is a need, therefore, for a more integrated approach at a geographical level with all organisations – MFIs and others – to work hand in hand, using their individual areas of core competence in addressing the needs of women in that particular area.

22It must be recognised that the holistic empowerment of a woman occurs at various levels – individual, household and community. Their needs at each level are different, and cannot be addressed by one organisation alone, and it becomes necessary to bring together other local resource organisations to address these concerns. Also essential to holistic empowerment is a conducive policy environment, which promotes better growth of the sector.


80 The module has been developed and the first round of training was conducted in February 2004.


Senior Programme Officer, Friends of Women’s World Banking (FWWB), Chennai (India)

© Institut Français de Pondichéry, 2005

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