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Microfinance challenges: empowerment or disempowerment of the poor?

Isabelle Guérin
Jane Palier

Part III - Assessing microfinance

22. Microcredit programmes, poverty alleviation and empowerment of women – some empirical evidence from Kerala

K.R. Lakshmy Devi

Texte intégral

1Empowerment of women by means of microcredit-based income generation programmes is a new orthodoxy in the development discourse. The new orthodoxy’s origin can be traced back to the failure of the “women in development” (WID) approach of the 1970s. Countries that incorporated this approach in their planned models for development were successful in including women as active agents in mainstream development, rather than mere recipients of welfare. However, these programmes, specially targeted at women, did more harm than good because of their irrelevance to the needs of women and their insensitivity to the specific issues faced by women. Moreover, during the same period, many of the developing countries rapidly implemented structural adjustment policies. The social and economic costs of structural adjustments are borne disproportionately by women everywhere, which manifest in reduced food intake, lack of health care and greater dependency for women (UNDP 1995; U.N. 1996). The most pressing need of the time became to find a new approach to poverty alleviation that was politically and economically manageable.

2It was at this juncture that microcredit programmes appeared on the scene, compensating for the failures of the earlier credit programmes in both developing and developed countries. The basic idea behind the programme is to make credit available to the poor, especially women, who lack access to formal banking institutions. Access to credit is vital to women’s ability to earn an income, which in turn is central to their status and autonomy. By providing small loans, without collateral security, these programmes help poor people to start tiny no-farm income generating activities. The programmes are generally confined to rural and semi-rural areas, which have a larger share of poor and marginal groups with relatively lower access to income generating activities.

3Most of the studies on microcredit narrowly focus on the “pragmatic success” of the programmes, where the principal variables studied are the number of beneficiaries, the amount of credit disbursed, recovery rates and profit flows. Studies that evaluate the actual impact of these programmes on earnings, employment and socio-economic status of the women beneficiaries and their empowerment are very limited. The present study assumes significance in this context. Moreover, in most of the studies on women and microcredit, only limited attention is given to the role of institutions. Empowerment is often conceptualised as the creation of institutional relations, which would enable women to achieve economic, political and social equality. The present study, which attempts to provide a critical perspective on the relationship between microcredit and women’s empowerment in Kerala by comparing non-governmental organisation (NGO)-led and State-led initiatives in this regard, assumes added significance. The paper is based on a field investigation enquiring into the functionalities of some selected microcredit programmes in Kerala.

4The basic objective of the present paper is to examine the comparative role of NGO-led and State-led microcredit programmes in creating incomegenerating activities for poor women, and their success in the empowerment of the beneficiaries.

1. Methodology

5This study was sponsored by the Institute of Planning and Applied Economic Research, John Matthai Foundation, and is based exclusively on primary data collected from a selected, random sample of 200 beneficiaries – 100 each from the microcredit programmes initiated by the “Society for Rural Improvement” (SRI), and NGO in Kollengode taluk of Palakkad district in Kerala, and the much-publicised State government initiative “Kudumbasree” from Thrissur district. The data was collected using a well-structured, pretested questionnaire in May-June 2003, and classified and analysed using appropriate statistical tools. The change in income for the beneficiaries was analysed by the methodology of Transformation Matrix analysis, the changes in the levels of poverty by the Poverty Line approach, and the extent of empowerment analysed by constructing an Empowerment Index based on the respondents’ answers to 10 attitudinal questions, relating to their self-esteem, self-confidence, autonomy and decision-making power consequent upon starting the microcredit-based income generating activity.

6The two microcredit programmes selected for the study differ significantly in many respects and the following table presents their major characteristics as well as those of the beneficiaries in a comparative framework.

Table 1. General profile of the selected programmes and beneficiaries


Society for Rural Development (SRI)


Type of Organisation



Geographical Location

Kollengode, Palakkad District (Backward Rural Area)

Thrissur District (Developed Municipal Area)

No. of Beneficiaries



Average Family Size



Sex Ratio



Share of Illiterates (Percentage)



Average years of Schooling



Share of Female-Headed Households (Percentage)



Share of Families Below Poverty Line (Percentage)



7It is clear from the above table that the two programmes selected for the study vary widely not only in terms of organisational set up and geographical location, but also in terms of the levels of living of the beneficiaries. But the choice of the schemes was done deliberately so as to compare the effectiveness of NGO-led and State-led initiatives in women’s empowerment and also the rural-urban differences. The major difference between the two programmes appears to be in the style of functioning. While SRI is a replica of the Grameen Bank of Bangladesh, with funding from various international sources, Kudumbasree is exclusively a State government-funded programme, with funding from the Union government, the National Bank for Agricultural and Rural Development (NABARD) and so on, which focuses on empowerment of women through SHGs. The basic differences as tabulated above also showed in the further analysis. The findings of the analysis are presented in the next section.

2. Findings

8Both the programmes give its members the freedom to choose income-generating activities according to their needs. Agriculture related activities constitute the majority of loans in SRI, while small enterprises constitute the major chunk of loans in Kudumbasree. The average monthly income of SRI beneficiaries was found to be just Rs.462, as opposed to Rs.1,212 in the case of Kudumbasree. This was only natural because the average loan amount was Rs.5,000 in the case of the former and Rs.25,000 in the case of the latter. But on the whole, the economic impact of the activities is evident from the increased incomes of the beneficiaries. The study revealed that in the case of SRI, as much as 64 per cent of the women had no income previously; now, all the women have at least some income to bank upon. It is quite significant that 92% of the beneficiaries reported an increase in income after participating in the programme. But the meagre average monthly earnings of the two groups suggest the need for improving the activities.

9The study tried to estimate the poverty status of the households before and after the initiation of the microcredit-based income-generating activities. The Ninth Five Year Plan document of the State government defines rural poor households as those with an annual income below Rs. 21,000 (Government of Kerala 1997). Based on this estimate, 92% of the households in the case of SRI and 69% of the households in the case of Kudumbasree could be classified as poor before the initiation of the programme. This proportion drastically declined to 48% in the case of SRI and 34% in the case of Kudumbasree, consequent upon the initiation of the programme. This clearly indicates the effectiveness of the microcredit programmes in alleviating poverty, whether the institutional agency is governmental or non-governmental.

10Another objective of the paper was to examine the extent of control of women over income earned by them through the microcredit programmes. 67% of the women reported that they had complete control over the income earned by them. 20% said they had only partial control of the income, sharing it with their husbands, while 13% reported that they had absolutely no control over the income earned, even thought the repayment responsibility in all cases fell only on the women who were the beneficiaries. Intra-group differences in this regard were negligible. All the women respondents were of the opinion that independent incomes raised their general status at home.

11The last, and perhaps the most important, objective of the study was to examine how far economic independence has led to the empowerment of the beneficiaries. Many researchers have questioned the degree to which microcredit programmes actually benefit women. Some researchers even observed that these programmes disempower women, reducing them to unpaid debt collectors for development agencies, and increasing tensions in the family (Goetz and Gupta 1996). Further, it is argued that microcredit programmes often divert the resources and attention of women from other more important strategies of empowerment and poverty alleviation (Ebdon 1995; Rogaly 1996).

12Empowerment is a subjective concept and denotes several things apart from mere economic independence. In order to facilitate some kind of quantification of the degree of empowerment, an empowerment index was constructed in response to the answers to the 10 attitudinal questions relating to their self-esteem, self-confidence, autonomy and decision-making power consequent upon starting the microcredit-based income-generating activity (see table 2).

Table 2. Attitudinal questions relating to empowerment

The questions were :
(i) Have your living conditions improved?
(ii) Have you purchased any assets or consumer durables?
(iii) Do you have a significant role in decision making at home?
(iv) Do you have an independent bank account?
(v) Do you have control over your income?
(vi) Has your leisure activities increased?
(vii) Have your movements outside home become unrestricted?
(viii) Has your self confidence increased?
(ix) Has your self esteem increased?
(x) Do you feel that there is an overall improvement in your status?

13All the questions had only two answers: “Yes” or “No”. Each positive answer was given 10 points. Unanswered questions were omitted. The total score ranged from 0-100. A score of upto 30 was regarded as “low empowerment”, 40-60 as “medium empowerment” and above 70, “high empowerment”. Each beneficiary was then graded on the basis of the scores obtained for the “empowerment index”. The above analysis clearly indicates that majority of women beneficiaries (42% in SRI and 68% in Kudumbasree) in the present sample reported a high degree of empowerment while for 31% in SRI and 21% in Kudumbasree, microcredit-led income generating activities resulted in medium scale empowerment. For a small proportion of 27% in SRI and 11% in Kudumbasree, microcredit programmes did not result in any significant empowerment.

14On the whole, the study, based on limited sample observations, concludes that the microcredit based income generating activities initiated by both NGOs and the State, have clearly helped in poverty alleviation and the empowerment of women. These activities made a difference in the lives of the poor women by providing them with economic independence, which brought along with it self-esteem, self-confidence and autonomy. But contrary to the general belief that the NGO-led programmes have been more effective than the State-led programmes (Chavan and Ramakumar 2002), this study concludes that the State-led programme has been more successful in generating better incomes and empowering women. But, at the same time, the meagre incomes generated were insufficient to improve the economic status of the households significantly, or to push all of them above the poverty line, because the majority of the beneficiaries (93%) did not seem to have gained much by way of technological improvement. Microcredit-based income generation activities is a good beginning, opening the doors of credit to the marginalised women who were hitherto denied access to traditional channels of credit, but, it indeed not the panacea for all the problems of the poor.


Professor, Department of Economics, University of Calicut (India)

© Institut Français de Pondichéry, 2005

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