Microfinance and Women Empowerment in India

22nd March, 2024 - 7:07 am Categories: News & Updates 0 Comments

Introduction

Women have been one of the most neglected and underprivileged segments of the society. Despite numerous efforts women have been the uninformed consumers of financial services. “Women empowerment” implies women hold over the use of resources and participation in the decision making as well as improvement in their social status. Microfinance is one such effort to empower women.

Microfinance refers to the services provided to low-income people or group of people who may otherwise would not be having access to traditional banking services. Many adults around the world still lack such access today, especially women. Only 37% of women worldwide report having access to financial services, as against 46% of male.^[1]

The taskforce on supportive policy and Regulatory Framework for Microfinance has defined microfinance as “Provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and improve living standards.”[2]

Development of Microfinance

The concept of microfinance is based on the Grameen Bank model in Bangladesh, which was established by Nobel Peace Prize winner Professor Mohammed Yunus. Yunus is credited with creating the most successful microfinance institution globally, boasting the highest percentage of borrowers and registered members as well as the highest effective repayment rate. As the best instruments to reduce poverty through the provision of small and affordable loans to the poor who are active through solidarity and on-lending procedures, his excellent work has been adopted and replicated by almost all developing countries and has even spread its wings to the developed world.

Services Under Microfinance

Microcredit: A microcredit is a very small loan provided to those with low income, or who do not have collaterals or any credit history people, to start their business ventures. It is also known as “microloan” or “microlending”.

Microsavings: Microsaving gives low-income families and individuals the chance to save money for future use in the form of a small deposit account. In case of microsaving the minimum balance requirements are usually omitted or are set at very low margins.

Microinsurance: These are affordable insurance products specially designed for low-income families to help them cope with and recover from financial loses. Some of the areas covered under this are crop insurance, health insurance, etc. Some of the microinsurance products are:

• SBI Life Grameen Shakti
• Kotak Sampoorn Bima Micro-Insurance Plan

Women Empowerment and Microfinance

Microfinance have been designed as a tool for serving women by providing them with microcredit. MFIs have reached nearly 450 lakhs clients with a total outstanding loan of Rs. 1,35,099 Cr under micro credit. Women borrower constitute of 99% of the total clientele of MFIs. ^[3]As of 2022 report, women constitute of 13% of the total employed personnel.^[4]

By providing them a way to get small loans to start their own business ventures, MFIs have helped women with economic independence. It can also be seen that a change in financial status of a woman affects her involvement in decision-making at family as well as community level.

Microfinance for women’s economic development can challenge existing gender conventions and enable women to assert their rights. As women achieve economic independence, they are better able to fight against discrimination and demand equality in their homes and communities. Greater gender equality and community development may result from their elevated social status.

DIFFERENT MFIs and INITIATIVES TAKEN BY THEM^[5]

DIFFERENT SCHEMES LAUNCHED BY COMMERCIAL BANKS TO PARTICIPATE IN WOMEN EMPOWERMNET:

 CHALLENGES

Microfinance in India faces several challenges. Few to mention are:

• Lack of infrastructure: MFIs often work in rural area which lack infrastructure. This in return lead to difficulty in transportation, communication and accessing financial services.
• Lack of financial literacy: MFI clients are often illiterate which can make it difficult for them to understand the terms and condition of the products.
• Over-indebtness: Most of the time borrowers fail to repay the loans which in turn impact the creditworthiness of the borrowers.

SUGGESTIONS AND CONCLUSION

MFIs are spread over 650 districts but there are still pockets left around the country where they still have scope to reach, therefore the first step would be to reach all geographies. Secondly, they should extend their services to the poorest of poor by designing products suited to such segment.

Author: Soumya Verma, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

REFERENCES

https://www.ripublication.com/

https://www.ijsr.net/

https://www.hks.harvard.edu/

^[1] Dina Pomeranz, The promise of microfinance and women’s empowerment, EY, pg. 2 (2014), https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.hbs.edu/ris/Publication%2520Files/EY-The%2520promise-of-microfinance-and-womens-empowerment_14123436-7f3a-4a87-a76f-94e931c9ed5e.pdf&ved=2ahUKEwiq8Kqjt4CFAxUGSGwGHXosCQQQFnoECB4QAQ&usg=AOvVaw2mZs_4q5kB3oCCWyud2VpU .

[2] Reserve Bank of India, https://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=1347 (last visited March 18, 2024).

^[3] Sa-Dhan, The Bharat Microfinance Report 2022, pg. xxi

^[4] Sa-Dhan, The Bharat Microfinance Report 2022, pg. xxi

^[5] Sa-Dhan, The Bharat Microfinance Report 2022, pg. 97-pg.100

[6] India Mapped, https://www.indiamapped.com/yojanas-in-india/priyadarshini-yojana/ (last visited March 18, 2024).

[7] Paisa Bazaar, https://www.paisabazaar.com/business-loan/mahila-udyam-nidhi-scheme/ (last visited March 18,2024).

[8] India Filings, https://www.indiafilings.com/learn/dena-shakti-scheme/ (last visited March 18,2024).