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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?

5. Historical analysis of empowerment and its present understanding in the context of microfinance97

Sunita Rabindranathan

Texte intégral

  • 97 I would like to thank Ms. Ranjani K Murthy, Researcher, Gender and Development, for her comments a (...)

1Since 1980, there has been a mushrooming of microcredit-based self-help groups (SHGs) in the country, organised initially by non-governmental organisations (NGOs), and by the late 1980s, by government organisations. The Indian government, aid agencies and several NGOs view SHGs as the panacea for poverty reduction and women’s empowerment. Microfinance is the provision of very small loans offered to a collective savings group that need to be repaid within a short period of time. The group guarantee allows a person to take a collateral-free loan.

2Interventions to integrate women’s economic roles have taken various shapes before arriving at the SHG format. Initially, women’s sanghas were promoted to organise women to improve their bargaining power at the personal, societal and political levels. These were further developed into savings and credit groups or thrift groups to promote access to credit facilities. SHGs grew out of these two interventions.

3Evaluation studies carried out in the recent years in India have clearly shown that while members of SHGs are slightly better off than non-members, and the process of their coming together builds the confidence of women members, there are limits to what microcredit-based SHGs can achieve without other interventions. Critics have often pointed out that there has been a de-politicisation of development and activism as a result of the mushrooming of microcredit-based SHGs, but there is no documented evidence of this.

4Historically, there have been different traditions of initiatives that built upon resources of the ‘self’, and tried to promote self-assertion, self-respect, self-governance and so on. Hence, it is essential to have a comparative understanding of the modern SHG with these initiatives.

5The terms ‘self-help’, ‘self-sufficient’, ‘self-reliance’, ‘self assertion’, ‘self-respect’ and ‘self governance’ are often used interchangeably in literature, though some of these terms mean different things. ‘Self-help’ means aiding one’s self without depending on the aid of others. It is also quite similar to phrases such as ‘self-sufficient’, which means sufficient for one’s self without external aid or cooperation and ‘self-reliance’, which means reliance on one’s self and power, trust on one’s self. While ‘self-respect’ is respect for one’s self irrespective of background and regard for one’s character, ‘self-assertion’ is a natural process for individuals who are confident and aware. Assertiveness is the ability to clearly represent one’s thoughts and feelings in a mutually respectful way, and claim rights from different institutions of society. ‘Self-governance’ refers to autonomy, self rule without outside interference. ‘Self-empowerment’ is when we realise our true potential within and make a conscious effort to transform that power to increase the quality of our life.

1. Definition of empowerment and historical perspective

  • 98 See the World Bank Website:

6People’s perceptions of being empowered vary across time, culture and circumstances: in India, a low caste woman may feel empowered when she is given a fair hearing in a public meeting comprised of men and women from different social and economic groups; in Brazil, in Porto Allegre, citizens – both men and women – feel empowered if they are able to engage in decisions on budget allocations98.

7Empowerment is, first and foremost, about power. It is about changing power relations in favour of those who previously exercised little power over their own lives. The idea of power is at the root of the term empowerment. Power can be understood as operating in a number of different ways (Williams et al. 1994):

  • Power over: involves an either/or relationship of domination/subordination;
  • Power to: relates to having decision-making authority, power to solve problems and can be creative and enabling;
  • Power with: involves people organising with a common purpose or common understanding to achieve collective goals;
  • Power within: refers to self-confidence, self-awareness and assertiveness. It relates to how individuals can recognise how power operates in their lives through analysing their experiences.

8Power has two central aspects – control over resources (physical, human, intellectual, financial and the self) and control over ideologies (beliefs, values and attitudes) (Batliwala 1993). If power means control, empowerment is therefore the process of gaining control. Empowerment is not something that can be done to a person by someone else.

9Empowering the self dates back to people’s movements, sustained efforts made through collective mobilisation to bring about change based on a predetermined or emerging ideology, that emerged in different parts of the country.

10In 1925, Periyar E. V. Ramaswamy started the Self-respecters Movement in Tamil Nadu, based on the philosophy that different sections of society should have equal rights to enjoy the fruits of the resources and the development of the country. He also stressed the need to abolish the hierarchal, graded caste structure based on birth, as a prelude to building a new, egalitarian social order. He wanted to lay a sound socio-cultural base, before raising a strong structure of a free polity and a prosperous economy. The self-respecters’ movement can also be seen as a movement in self-assertion.

11While the Periyar movement was predominant in Tamil Nadu, the Gandhian Movement spread all over the land from the 1920s onwards. Gandhi's movement emphasised the need for self-governance by citizens of the country. Gandhi emphasised that even the last person in society should be given a fair chance. He believed in ‘antyodaya’, which he later promoted as ‘sarvodaya’, meaning ‘everything for everyone’. He firmly believed that people should rule themselves and that there should be no centralised power. He believed power corrupts, and that absolute power corrupts absolutely. He emphasised the de-centralisation of power, and propagated ‘Gram Swaraj’ and self-governance.

12In 1944 there was a Marxist-oriented peasant movement in Telengana, now Andhra Pradesh. The Telengana Movement, involving about 3,000 villages and 41,000 sq km of territory, was the outcome of a strained social and economic fabric and an iniquitous political economy in which powerful doras (landlords holding large holdings of land) extracted free labour from Dalit men and women. This can be seen as a self-assertion movement, with a thrust on claiming land rights by labourers, in the context of the failure of the state to protect their rights.

13The Chipko Movement, which symbolised tree protection, emerged from the need to protect the existence and self-sufficiency of the local people. The first Chipko (the Hindi word for embrace) action–the villagers hugged the trees to save them from the contractors’ axes – took place spontaneously in April 1973 in Uttar Pradesh, now called Uttaranchal, and over the next five years spread to many districts of the Himalayas in the State. The protests achieved a major victory in 1980 with the Prime Minister ordering a 15-year ban on green felling in the Himalayan forests in the State. Since then the movement has spread to Himachal Pradesh in the north, Karnataka in the south, Rajasthan in the west, Bihar in the East and the Vindhyas in central India. The movement can thus be seen as a self-assertion movement, vis-à-vis state and market forces.

14Similarly in Karnataka, in 1965, five people initiated a farmers’ movement, which was to give birth to the Karnataka Rajya Raitha Sangha (KRRS) or Karnataka State Farmers’ Association in 1980. They went beyond farmers’ problems and aimed for total social change. They saw the movement as part of a long process of construction of a new society, driven by people at the local level but aiming for the global level, which cannot take place without the active and direct involvement of society as a whole. They dreamt of a ‘Village Republic’, which would ensure equal participation of all in the economic and political process. This movement can be seen as a self-assertive, self-governance movement, and very progressive towards women.

15Yet another powerful movement of opposition sprang up in the last decade against the hydroelectric projects on the Narmada river in western India, spearheaded by the Narmada Bachao Andolan. More than one crore people were displaced due to development projects and became refugees in their own country. The NBA agitated against this, emphasising the rights of local people over local resources – land, water, and so on.

16While different movements and traditions have contributed to an understanding of power and empowerment, the Feminist Movement has emphasised collective organisation and been influential in developing ideas about power within.

17The Anti-arrack (State-supplied distilled liquor) Movement that led to the eventual ban of arrack sales in Andhra Pradesh in 1995 started when a group of women participating in a literacy programme started questioning their oppressed status. Spurred into action by the killing of a village woman who was beaten to death by her drunk husband, they took on the men of the village, the powerful arrack contractors, and the repressive State machinery in a valiant struggle, and demanded a stop to the endless supply of arrack to their village (the only village tap dispensed water once in two days, while the arrack shop received its supplies twice a day). The movement took hold and spread across the State over a period of four years. This was a true grassroots movement; even today it has no identifiable leaders. It is a mark of the inherent self-dignity of women to say ‘no’ to their ill-treatment. The women were empowered by their incredible political and social consciousness and courage, and their steady realisation that through struggle, they could control their own destiny.

2. SHGs and women’s empowerment

18The spate of social movements has come down significantly in the last two decades, the reasons for which merit attention. The same period has seen an increase in the emphasis on implementing development interventions at the micro level both by the government and NGOs. The microcredit-based SHG is the most common development intervention that has mushroomed throughout India.

19The self-help model of microfinance promotes SHGs and other types of smaller affinity groups composed predominantly of women, to start with pooled savings for internal rotation. Through a process of social mobilisation, they eventually receive and repay loans.

20There are basically three types of approaches for incorporating microcredit in the programmes:

21First, NGOs or government agencies with different primary objectives – promoting literacy and education, maternal and child health and nutrition, reducing female infanticide or child labour, encouraging watershed development, taking up women’s empowerment and so on – have used microcredit as an entry point or as a complimentary activity, recognising that it is harder to mobilise poverty-stricken people and sustain their interest around other issues. Second, there are also NGOs and government agencies primarily concerned with poverty alleviations, which use microfinance as their main tool. Third, there are approaches where the relative strengths of the government, NGOs and banks are combined under an umbrella organisation promoting multi-purpose SHGs where microfinance is one of the inputs, along with systematic training and capacity-building in virtually any subject of concern and interest to the members (Rajivan 2001).

22Its proponents see microfinance as empowering women since a large segment of microfinance clients are women. The pro-microcredit SHG lobby argue that SHGs open up channels of credit to women, as moneylenders and banks do not lend to them as they have little collateral to offer. Its opponents argue that women have been targeted for more practical reasons – that women are more likely to repay on time than men, women are more pliable and patient than men and so less likely to make awkward demands of the credit scheme managers and they can be serviced by women staff who are cheaper to employ than men.

23There are around a million SHGs in India with membership of about 15 million rural homes, of which SHGs linked to banks is around 7.18 lakhs, involving a cumulative bank credit of Rs. 20,500 million.

24Critics of microcredit SHGs also observe that while the historical movements in the country have always been the collective efforts of men and women together, the SHGs of today focus only on issues related to women’s empowerment, with the hypothesis that men would always oppose or discourage the empowerment of women. While some of the movements have also been the effort of only women (for example, the Anti arrack Movement), the formation of micro-credit SHGs have led to competition among groups to procure loans. In recent years the success of some microfinance institutions in enlisting large numbers of women as their members has suggested that microfinance is an intervention uniquely beneficial to the needs of women.

25Even seen from the lens of its impact on poverty, when one considers the economic conditions of the members of these groups, the amount the members mobilise within themselves is insufficient to meet even their consumption needs. This leaves hardly any scope for production or investment credit. It has been recognised that credit is only one of the many services the poor need to increase their income, and increased income is itself not sufficient to eradicate poverty (Nair 2001). As Amartya Sen said: “Poverty is not merely insufficient income, but rather the absence of a wide range of capabilities, including security and ability to participate in economic and political systems” (Sen 2000). Just as the poverty of some does not imply an overall shortage of satisfiers, so in the extreme case the starvation of some does not imply an overall shortage of food, but rather those people’s shortage of convertible claims, entitlements, and acquisition power.


26There is no doubt that microcredit-based SHGs enhance the opportunities to earn a livelihood and increase the woman’s physical space due to her membership and activity in the SHG. However, empowerment does not necessarily take place when incomes are generated or when livelihoods are enhanced or, for that matter, when groups are formed. Even though history records the existence of social movements that contribute to the self-assertion, self-governance, self-reliance and self-empowerment of people, the concept of the self has narrowed down to self-help and more so, self-help groups, which are considered to be empowering.

27The self-based movements reflected a ‘collective spirit’, with the feeling of self-worth part of a bigger change. SHGs, however, though they appear to be collective, often lack this spirit, as their members are more concerned about personal gain, rather than a common purpose. The disparity in issuing of loans, or the difference in profit making among the group members, invariably produces a competitive feeling that challenges the collective spirit. Though SHGs help in asset building and relatively good relations among the members, they bring a constant ‘debt pressure’ to the groups. Women even hesitate to go in for big business ventures, as they know that once their business is successful, the male members of the family will take charge of it. This clearly indicates that women’s empowerment cannot be ensured through micro-credit alone. Social constraints, too, need to be properly addressed.

28The argument that today’s microfinance is empowering to groups does not justify the concept of empowerment that earlier movements in the country fought for.


97 I would like to thank Ms. Ranjani K Murthy, Researcher, Gender and Development, for her comments and suggestions on an earlier version of this paper and Dr. Neelavalli, Director, IWID for her continued support.

98 See the World Bank Website:


Research Coordinator, Initiatives: Women In Development (IWID), Chennai (India)

© Institut Français de Pondichéry, 2005

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