Microcredit and Women's Empowerment: Have We Been Looking at the Wrong Indicators?

Abstract

The impact that microcredit has on women's empowerment has been much debated in the literature. Some studies find negative effects; some find positive effects and others no effect. A reconciliation of these discrepancies has been attempted by attributing them to the usage of different measures of empowerment. In particular, it has been argued that those studies that view empowerment as outcomes for women associated with their access to loans, find positive effects, and those studies that focus on processes of loan use find negative effects. These different ways of measuring empowerment are the focus of this study. Using data collected from 397 women participants in a microcredit programme in rural India, it is evident that measuring empowerment in terms of outcomes alone—as most impact assessments do—is not only insufficient but can actually be misleading as well. The findings of this study suggest that a more robust understanding of the linkages between lending to women and their empowerment can be achieved by focusing on the processes surrounding loan use and repayment. The findings of this study also caution against the excessive focus on outcomes as a measure of women's empowerment.

Notes

The author acknowledges the financial support received from the Department for International Development (award number R7617) and the Newton Trust (award number INT 2.05[d]). The author thanks Sylvia Chant, Isabelle Guérin, Barbara Harriss-White, Susan Johnson and the participants at a workshop at the Université libre de Bruxelles (January, 2010) for useful comments on earlier versions of the paper. She is grateful to her field research team: Achari, Chandrasekhar, Lakshmamma, Narsimhulu, Lakshmi, Padma, Ravi, Rathish and Sridevi.

¹ Purdha is the practice of veiling and secluding women from society by restricting their personal, social and economic activities outside their homes. A woman in purdha is expected to remain mainly at home and if she comes out, she does so only under strict stipulations regarding what she wears, where she goes and who she meets (see also Heitzman & Worden, 1997).

² The Rural Finance Access Survey for 2003, however, indicates that poorer households in rural India still have very little access to formal finance. For instance, 70% of marginal/landless farmers do not have a bank account and 87% have no access to institutional credit (Basu & Srivastava, 2005).

³ The microfinance crisis in India, which broke out in the autumn of 2010 is marked as a particularly low point in India's microfinance industry when several women were reported to have committed suicides due to repayment pressure from commercial credit agencies in the state of Andhra Pradesh (Arunachalam, 2011). This crisis resulted in new legislation by the state government that criminalises the coercive recovery practices employed by some lenders. Reports suggest that some commercial lenders have responded by withdrawing their business interest from rural Andhra Pradesh.

⁴ Planning Commission press release, 22 February 2001. The correctness of the official poverty figures is intensely debated (see Deaton & Drèze, 2002). Income is net of costs but not of loan repayments.

⁵ The data for this study were collected as part of a larger study that investigated female labour market participation and issues surrounding pro-poor growth (for details see Horrell et al., 2008). Interviews were carried out by six enumerators, three men and three women, who were at least graduates and trained by the author in basic survey techniques. At least two enumerators, one male and one female, were present at every interview. The author, fluent in the local dialect, randomly participated in over one-third of all interviews and carried out all the focus group interviews.

⁶ This includes one case where gold was purchased. In all other cases, the land bought or improved was in the husband's name.

⁷ An accompanying study carried out in the same villages surveyed 291 randomly selected households. According to this survey, households on average own 2.85 acres of land, and women on average control a mere 0.09 acres, or just 3% of the household land (Garikipati, 2008a).

⁸ This compares with Goetz & Gupta's (1996) findings for BRAC, Bangladesh. If we classify all women scoring two or more points as in significant control of their loans then our data suggest that 60% or 237 of 397 women exert a significant degree of control. This compares with findings from studies for Bangladesh's Grameen Bank (Goetz & Gupta, 1996; Hashemi et al., 1996; Rahman, 1986). To some extent, this exercise reflects the drawback in using a binary variable (taking values 1 or 0) to indicate a woman's control over her loan. Researchers can define a cut-off point to signify control over a loan in a way that suits their argument.

⁹ Note that the testimonies presented are from a mix of individual and focus group interviews. Here, it is important to note that if women are sitting with other members of their SHG, who may all be exerting pressure to repay, there is a risk that they might need to implicate husbands in not enabling them to repay when in fact this might be a strategic default in which the woman is complicit because repaying the SHG is not a priority. We are grateful to an anonymous referee for making this point. However, two additional points need to be mentioned. First, we do not have any “actual” default in our sample and second, focus groups were selected because of the similarity of experiences, so the likelihood that women from a focus group belonged to the same SHG was relatively small.