Empowering Women through Microfinance: Evidence from India
“Empowering women through Microfinance” is an article that appeared in the December 2007 issue of UNDP’s Poverty in Focus. The article is authored by Ranjula Bali Swain and Fan Yang Wallentin from Uppsala University.
Microfinance programs have been increasingly promoted in India for their positive economic impact and the belief that they empower women. Within the South Asian context, women empowerment is a process in which women challenge the existing norms and culture, to effectively improve their well-being. The article investigates the impact of microfinance on women’s empowerment, using 2000 and 2003 Indian household survey data.
Most microfinance programs target women with the explicit goal of empowering them. However, their underlying premises are different. Some argue that women are amongst the poorest and the most vulnerable of the underprivileged. Others believe that investing in women’s capabilities empowers them to make choices, which will contribute to greater economic growth and development. Finally, some proponents emphasize that an increase in woman’s resources results in higher well-being of the family, especially children.
Defining Women’s Empowerment
Naila Kabeer defines women’s empowerment as the process by which those who have been denied the ability to make strategic life choices acquire such ability. This ability to exercise choices incorporates three inter-related dimensions: resources which include access to and future claims to both material and social resources; agency which includes the process of decision-making, negotiation, deception and manipulation; and achievements that are the well-being outcomes.
Measuring the Impact of Microfinance on Women's Empowerment
Given the complexity of defining women’s empowerment it is not surprising that only a few empirical studies have tried to examine the impact of microfinance on women’s empowerment. For the most part, empirical research on microfinance’s effect on women’s empowerment has been conceptually ungrounded and tends to estimate an over-extended definition of empowerment or a truncated aspect of it. A number of these studies also suffer from methodological bias and flaws. In fact, only a few studies have successfully investigated this impact in a rigorous manner.
The interpretation of women’s empowerment and its measurement varies across studies. Most researchers construct an index/indicator of women empowerment. However, measuring women empowerment by constructing indices is an inappropriate technique as it allows the use of arbitrary weights.
Most researchers, for instance, will agree that impact of a women’s decision to buy cooking oil for the family is different in nature from her participation in a decision to buy a piece of land. Both these decisions have different implications and magnitude of impact on her empowerment. As such giving equal weight to both these decisions does not make sense. At the same time, suggesting an arbitrary weight for these decisions is also inappropriate, as it is not for the researchers to decide the factor by which the latter decision contributes more to women empowerment.
Other studies use Item Response Theory, where the element of analysis is the whole pattern of a set of binary indicators that proxy for woman’s autonomy, decision-making power, and participation in household and societal decision making. These studies have found that credit programs allow women to take a greater role in household decision making; to have greater access to financial and economic resources; to have greater access to financial and economic resources; to have greater social networks and more bargaining power vis-à-vis their husbands; and to have greater freedom of mobility.
A study of women in rural Kenya found that in microcredit programs, women do not gain much in terms of decision-making power within the household. However, when loans are channeled through women’s groups and are combined with more investment in social intermediation, substantial shifts in decision-making patterns are observed. This involves a remarkable shift in norm-following and male decision-making towards more bargaining and sole female decision-making within the household.
The effects are even more striking when women have been members of a group for a longer period and especially when greater emphasis has been laid on genuine social intermediation. Social group intermediation further gradually transformed groups into actors of local institutional change.
Microcredits and Gender Equality
Another issue that needs further investigation is whether microcredits reinforce women’s traditional roles or promote gender equality. A woman’s practical needs are closely linked to the socially defined gender roles, responsibilities, and social structures, which contribute to a tension between meeting women’s practical needs in the short-term and promoting long-term strategic change. By helping women meet their practical needs and increase their efficacy in their traditional roles, microfinance may in fact help women to gain respect and achieve more in their socially defined roles, which in turn may lead to increased esteem and self-confidence.
Although increased self-confidence does not automatically lead to empowerment, it may contribute decisively to a woman’s ability and willingness to challenge the social injustices and discriminatory systems that they face. This implies that as women become financially better-off their self confidence and bargaining power within the household increases and this indirectly leads to their empowerment. Finally, given that empowerment is a process, the impact of the microfinance program may take a long time before it is significantly reflected on the observable measures of women empowerment.
Women’s Empowerment through Microfinance in India
In their article, the authors use a technique to estimate empowerment as a latent rather than an observed variable. Their model estimates the mean level of women’s empowerment for 2000 and 2003, measuring the impact of the Self Help Group (SHG) program on women’s empowerment.
Their analysis indicates that on average there is a significant increase in women’s empowerment of the SHG members group. No significant change is observed on average for the members of the control group. The elegance of the result lies in the fact that even though the degree of change and the pace of empowering women are likely to vary the group of SHG members experience a significant and higher empowerment.
It is difficult to say which factors are more important for empowering women. The differences in pace of empowerment might be a result of various factors: household and village characteristics, cultural and religious norms within the society, behavioral differences between the respondents and their family members; and the kind of training and awareness programs that women have been exposed to.
For SHG programs, the results seem to indicate that the minimalist microfinance approach is not sufficient. Additional services like training, awareness raising workshops and other activities over and above microfinance programs that merely focus on financial services are also an important determinant of the degree of its impact on the empowerment process of women. Future research needs to identify which factors in SHG programs have a greater impact on women’s empowerment.
- Swain, R.B. and Wallentin, F.Y.: Does Microfinance Empower Women? Evidence from Self Help Groups in India. Uppsala Universitet, Dept. of Economics Working Paper 2007:24.