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Microfinance challenges: empowerment or disempowerment of the poor?

Isabelle Guérin
Jane Palier

Part III - Assessing microfinance

20. Social externalities of women’s empowerment through microfinance: a comparative study of two interventions

M. Indira

Texte intégral

1The empowerment of women as a goal to engender the process of development has been very popular in recent times. Many development agencies now realise that women’s empowerment is the key to long-term poverty alleviation. It is defined as increasing the self-reliance of poor people, especially poor women.

2Microfinance programmes for women are more and more promoted not only as a strategy for poverty alleviation, but also for the empowerment of women (Mayoux 1996). These programmes have an impact not only on the target group but also on the society in which they live.

1. Conceptual clarification and methodology

3Externalities are costs or benefits arising from an economic activity that affects people other than those engaged in that activity. Positive externalities are the benefits accruing to third parties other than those involved in the original transaction. Over the last few years, this economic concept has been applied in different fields to understand the social gain due to government programmes. For example there are studies that looked into the positive externalities of government watershed development programmes, immunisation programmes and so on. In these studies, the positive impact of these programmes on the community as a whole, apart from the target group, has been studied.

4The present study makes an attempt to analyse the social gain from the women’s empowerment programmes through microfinance. It looks into the impact of the microfinance programmes on the community through their impact on the target group. Several studies have clearly brought out the impact of these programmes on women and their individual and group empowerment. A National Bank for Agricultural and Rural Development (NABARD) study clearly showed that the social impact of these programmes on the household is more than the economic impact (Puhazhendhi and Satyasai 2000). Another study (Rajashekar 2000) looked into the impact of microcredit on poverty alleviation and empowerment. A study of 64 women of MYRADA showed that the number of decisions made by the husbands fell significantly over a five-year period (Puhazhendhi and Satyasai 2000). In Bangladesh it was observed that “microcredit has not led to a transformation, but has become an additional resource, around which negotiation occurs” (Fisher and Sriram 2002).

5All these studies looked into the impact on the members and on the household, but no study has focused on the impact of this on the community and the village structure.

6Women’s empowerment programmes are helping not only the target group, but also the society around this group in three ways, which can be considered as positive externalities of these programmes.

  1. They create a critical mass of women who are more confident to face the local problems, participate actively in the Grama Sabha, think rationally to take appropriate decisions, and make the local institutions function well.
  2. Create an equitable society where there are no gender biases.
  3. Contribute to the greater utilisation of local resources and provide services.

7The specific objective of this study is to make a comparative analysis of the impact on the community of two women’s empowerment programmes through microfinance – the Stree Shakthi and Mahila Samakhya programmes, implemented in Karnataka, India. While the former falls into the category of directly providing access to credit, the latter belongs to the category where providing access to credit is only one component. The results do not speak of the whole programme, because of the limits of the sampling. However, it provides a framework to understand the social impact of these groups.

1.1. Indicators of social externalities

8The benefits accruing to the community due to the formation of self-help groups (SHGs) are called positive social externalities and the majority of them are intangible benefits, which are difficult to measure. Positive social externalities may be in the form of increased awareness levels of the community, better participation in governance and so on. However, an attempt is made to quantify these benefits in the form of indicators given below.

Positive externalities

  • Greater participation of women in local governance bodies.
  • Increased availability of services locally.
  • Increased utilisation of resources available locally.
  • Acting as agents of transformation.
  • Opposing social evils and taboos on the girl child and promoting the welfare of the girl child.
  • Facilitating group functions.
  • Better implementation of other welfare programmes.
  • Work towards building a healthy society.
  • Promotion of a society with gender equity.
  • Demanding accountability from mainstream education and health facilities.
  • Inspiring other local community-based organisations through healthy competition.
  • Promotion of human capabilities.

Negative externalities

  • Increased social tension in the village.
  • Displacement of local structures.
  • Emergence of leaders who claim undue benefits.

9The study, a pilot study undertaken in Mysore district in Karnataka, is based on primary data collected through an interview schedule and group discussions with the sample respondents. Three groups each were selected randomly from the Stree Shakthi and Mahila Samakhya, the main criterion being the same age of the groups. The sample consists of 120 members from both the groups.

1.2. Comparison of Stree Shakthi and Mahila Samakhya Programmes

10Both programmes were introduced in Karnataka with the stated objective of women’s empowerment. Stree Shakthi was initiated during 2000-01 by the Department of Women and Child Development in the rural areas of all the 176 taluks in the district. Mahila Samakhya is one of the important quasi-central government programmes implemented in Karnataka. The differences in the strategies and intervention mechanisms are summarised below.

Table 1. Comparison of Stree Shakthi and Mahila Samakhya Programmes

Table 1. Comparison of Stree Shakthi and Mahila Samakhya Programmes

2. Findings of the study

11With the help of the indicators mentioned earlier, the outcomes of the two interventions were analysed. The results are presented below.

2.1. Participation in local governance bodies

12The participation of women in local governance bodies helps in engendering governance at the grassroots level, which is one of the positive externalities of these programmes. The formation of women's groups, training and motivation by the implementing agency created a space for rural women.

Table 2. Changes after joining groups (as mentioned earlier, the sample consists of 120 members for each group)


Stree Shakthi

Mahila Samakhya

Can organise any public function/programme



Can participate in any public meeting/programme



Received more information about various programmes



Can meet any government official



Can travel alone



More aware of social issues



13This clearly shows that whatever the type of intervention, the formation of the group helped women to gain strength and confidence. This individual empowerment not only helps her family, but also helps in making them partners in the development processes.

2.2. Promotion of gender equity

14Both programmes aim at the empowerment of women by promoting gender equity. However, this is given more importance in the case of Mahila Samakhya. As mentioned earlier, the starting point of Mahila Samakhya interventions is the formation of groups without the savings and credit component, which comes later. Through federation of groups and their weekly meetings, women become legally, politically and economically aware. This resulted in better gender relations at home. This is reflected in the utilisation of the money borrowed. For example, the majority of the Mahila Samakhya members who borrowed from their groups invested in the activities in which they themselves actively participated, but in the case of Stree Shakthi members, the borrowed money was invested in activities that are managed by their men.

2.3. Negative externalities

15The formation of women’s groups initially created some amount of tension locally. The men, used to their own dominance, were not prepared to give equal status to women, and were unable to accept the women attending meetings and asking for equality. This has created tensions both at the household and community levels. Men started abusing group members and the motivators. In one village, the villagers did not allow the members to conduct their weekly meetings in the Anganvadi building and the meetings had to be held in the open space outside the house of the motivator.

16There was no displacement of any of the local institutions in the sample villages because the spread of these interventions is minuscule compared to the requirement. For example, the availability of credit has reduced the dependence of these households on local moneylenders. But it has not affected it to the extent that these lending institutions disappear.

17In the case of Stree Shakthi, which is implemented by the government machinery, it was observed that Anganwadi teachers, who acted as the motivators in the formation of the groups, tried to exercise control over and gain undue importance in the groups. As a result, political parties tried to influence the teachers. There was no such problem in the case of Mahila Samakhya.


18The study shows that women’s empowerment through microcredit has a positive impact on the community. Linking empowerment through microcredit has a better binding and sustaining effect, because mere empowerment through awareness creation will soon lead to a loss of interest among the members. Microcredit programmes without the element of awareness creation will make these institutions only ‘micro-lending institutions’, where credit is available at a cheaper rate. If microcredit is part of the empowerment programme, “enlightened self-interest” makes members come together and participate actively. Mahila Samakhya is more successful in combining both and its members are more aware of social issues, the strengths of people’s organisations, legal aspects relating to women’s issues and gender equity. Mahila Samakhya group members have created a space for themselves and are able to participate in local governance structures, and make the local institutions work for their betterment.

19Members of both groups could fight against social evils, demand accountability from local institutions, fight for better facilities from public services and so on but the force behind all these activities is the economic incentive, that is, their savings and credit.

20The “demonstration effect” of Mahila Samakhya groups is more due to the social interventions of these members. Many of the Mahila Samakhya groups have come into existence due to the felt needs of the members. Having heard of the working of groups in nearby areas, these women approached Mahila Samakhya motivators for help to form a group.

21But in the case of Stree Shakthi, since it is a structured programme and target oriented, each Anganvadi teacher was given a target and she acts accordingly. Members joined mainly because the teacher asked them to join. Since Stree Shakthi programmes are introduced and implemented by the government, both the motivators and the target women consider it similar to any other social welfare programme. Due to this, its impact on the efforts of social transformation is limited. But in the case of Mahila Samakhya programmes, it is looked upon as a people’s programme and the issues addressed have a far-reaching impact on the members.

22Another important observation is that all the drawbacks of bureaucracy have been inherited in the Stree Shakthi programmes, such as the race to reach targets, rigid rules and regulations, bias in the selection of training agencies and so on.

23Despite the large number of groups created, their spread is small. For example, in a village population of 500, a group with 20 women cannot make a real, sustainable impact. It is necessary to spread it in many more areas and as a first step it is necessary to map out the interventions to identify the areas of crowding and areas that are left out. It is also useful to develop a systemic approach where entire village communities, occupational structures and the availability of local resources are taken into consideration, and appropriate local skills/activities are promoted in order to take up group activities that will have a greater impact on the village economy.

24Economic empowerment is only one necessary condition for the emergence of positive social externalities. But if economic empowerment can be cemented with other inputs such as awareness (health awareness, awareness about legal rights, political participation and so on) and gender sensitisation, the emergence and impact of positive social externalities will be much more spectacular.

Table des illustrations

Titre Table 1. Comparison of Stree Shakthi and Mahila Samakhya Programmes
Fichier image/jpeg, 173k


Reader in Economics, Department of Studies in Economics and Cooperation, University of Mysore (India)

© Institut Français de Pondichéry, 2005

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