Microfinance & Women Empowerment

Submitted toProf. Simranjeet Kaur

What is Microfinance ?
The extension of small loans to entrepreneurs too poor to qualify for traditional bank loans. An effective and popular measure in the ongoing struggle against poverty, enabling those without access to lending institutions to borrow at bank rates, and start small business. The global microfinance sector has nearly reached US$30 billion in asset size reaching 130 million clients worldwide

Objectives of Microfinance
In context of empowering the women are Increasing women's income levels and control over income leading to greater levels of economic independence Access to networks and markets giving wider experience of the world outside the home, access to information and possibilities for development of other social and political roles Enhancing perceptions of women's contribution to household income and family welfare, increasing women's participation in household decisions about expenditure and other issues and leading to greater expenditure on women's welfare More general improvements in attitudes to women's role in the household and community

How does Microfinance work?

Small amounts of loans and savings Short processing periods The availability of repeat loans in higher amounts for clients who pay on time

Short loan terms

Simple application forms which are easy to complete

No collateral is required contrary to formal banking practices

Payment schedules featuring frequent instalments (or frequent deposits)

Easy access to the microfinance intermediary

High interest rates on credit

Microfinance role in Development

Why Target WOMEN?

- Only 19 % of the worlds parliamentarians - 1/3 of all women are subjected to violence
Gender and Development

Evidence that improved gender equality is a critical component of any development strategy.

Empowering women

Women Are the Poorest of the Poor

- 60%

of the worlds poorest - 2/3 of the worlds illiterate

womens repayment records and cooperativeness.

Efficiency and Sustainability

Women Spend More of Their Income on Their Families

Virtuous Spiral
SOCIAL AND POLITICAL EMPOWERMENT
greater confidence and sense of selfworth expanded knowledge / skills formation of support networks through group activity enhanced status / gain respect / become role models => process of change in community perceptions

ECONOMIC EMPOWERMENT
start their own economic activities / invest more in existing activities acquire assets raise their incomes or their control of their own and household income raise their status in household economic activities through their visible capital contribution

HOUSEHOLD WELL-BEING
play a more active role in household decision-making decrease their own and household vulnerability increase investment in family welfare

Social Impact of Microfinance

In context of Empowerment of Women Women are now more financially literate and confident

Contd.

Social Impact of Microfinance

Building Economic citizenship
Financial services foster Independence. Microfinance can help clients to grow more confident and with that economic citizenship they can step out and become a part of main stream of society. To fight with poverty Financial services give clients to access to education, healthcare, and other necessities that improves their quality of life. i.e. school fee loan, health insurance and home improvement loan.

Scope of Microfinance
In India, Micro finance is growing faster than banking and, if the experience in other developing countries is mirrored here, microfinance will reach more individuals than the banking sector,
- Robert Annibale, global director Citigroup Inc. Microfinance

Scope of Microfinance
35

Nos. of Clients in Millions

30 25 20 15 10 5 0 2008 2010 2015 Banking Microfinance

*For 2015 the projection sourced from citigroup microfinance

Microfinance Companies In India

SKS Microfinance Ltd. Basics Microfinance Ltd. Share Microfin Limited Spandana Sphoorty Financial Ltd (SSFL) Asmitha Microfin Ltd Bandhan

Limitations
Micro Loans should never lends to individuals without first providing them with the expertise and training to build a business plan that is likely to succeed.

Commercial banks Schemes - Women

Commercial banks Bank of India Canara Bank Central Bank of India Dena Bank Oriental Bank of Commerce Punjab National Bank Punjab & Sind Bank State Bank of India State Bank of Mysore Name of the scheme Priyadarshini Yojana CAN Mahila Cent Kalyani Dena Shakti Orient mahila Vikas Yojana Mahila Udyam Nidhi Scheme, Mahila Sashaktikaran Abhivan & PNB Kalyani Card Scheme Udyogini Scheme Stree Shakti Package Mahila udyam Nidhi

Union Bank of India

ICICI Bank IDBI Bank Vijaya Bank

Viklang Mahila Vikas yojana

Womens account Mahila Udyog Nidhi & Mahila Vikas Nidhi Assistance to Rural Women in Non-Farm, Development (ARWIND) & Assistance For Marketing Of Non Farm Products Of Rural Women (MAHIMA)

Conclusion
Microfinance has the potential to have a powerful impact on womens empowerment Although microfinance is not always empowering for all women, most women do experience some degree of empowerment as a result Empowerment is a complex process of change that is experienced by all individuals somewhat differently.
Contd.

Types of Economic activities pursued by women with the help of microfinance

1. Dress designing 2. Embroidery 3. Knitting 4. Making of stuffed toys 5. Selling vegetables and fruits 6. Dairy farming 7. Poultry 8. Agriculture 9. Running tea shops, Grocery shops 10. Manufacturing of wood and cane products 11. Garment making 12. Food processing 13. Bee keeping 14. Basketry 15. Gem cutting 16. Weaving and spinning 17. Glass and emboss paintings 18. Vegetable gardening 19. Cattle rearing 20. Floriculture

Conclusion
Women need, want, and profit from credit and other financial services Strengthening womens financial base and economic contribution to their families and communities plays a role in empowering them In some cases, access to credit may be the only input needed to start women on the road to empowerment. But power is deeply rooted in our social systems and values.
Contd.

Contd.

Contd.

Conclusion
Shows that a significant proportion of the respondents (69.1 %) were of the age group of 20-40. Maximum respondents were single (40.9 %) and living in joint families (61.8 %). Though maximum respondents were literate (74.5 %), it is also observed that a significant proportion of the respondents(40 %) were having education only up to matric, not even a single respondent was having post graduation degree that shows the existence of the traditional phenomenon of the low level of education among females. Most of the respondents were employed as labor (51.8 %) followed by self-employed (26.4%). However, a significant number of respondents were either housewives (21.8 %). Not even a single respondent was involved in any profession and family business which indicates the low level of entrepreneurships among women. The reasons may be the extra burden along with household responsibilities, lack of adequate resources like finance because of lack of collaterals. Moreover, the finance providers may doubt their business skills and their ability to manage the finance. As far as level of income is concerned maximum respondents (35.5 %) were falling in the range of Rs. 2000-4000 per month which is quite low.
Contd.

Formal v/s Informal Sources of Finance

Uses of Sources of Finances

Contd.

Shows the use of various formal and informal source of finance The study found that the majority of the respondents prefer formal sources of finance in order to park their hard earned money. As depicted in the above table maximum respondents are having bank accounts (46.9 %), though a significant proportion of the sample still prefer to keep cash at home (21.4 %) while only 18.4% were having post office savings. In contrary to this, the majority of respondents preferred informal sources of finance over the formal ones for availing credit. As the table shows the most common informal source of finance is the relatives/friends (44.4 %) followed by employer and colleagues while only 22.2 % of the respondents availed credit from the banks. And interestingly, use of semi formal sector such as MFIs, SHGs and NGOs was found to be almost negligible. This may be because of lack of awareness among rural people about these channels.

Level of Satisfaction This section of the article deals with examining the satisfaction level of the respondents with regards to the microfinance services availed from different sources of finance. A questionnaire containing twenty variables related to micro credit was administered to 110 respondents. These variables have been derived from the earlier literature (Kamble, Sonar, 2006; Pandey, 2008; Albino, Subramanian, 2008; Ramji 2009). Out of the total number of respondents only 54 respondents reported having taken credit from one or the other sources of finance. The respondents were asked to rate each variable on a five point likert scale Savings according to the satisfaction derived from it. For the purpose of analysis of the satisfaction level of the respondents, Weighted Average Score (WAS) was calculated for each variable. The variables were categorized as variables of high satisfaction, moderate satisfaction, and slight satisfaction depending upon their WAS as explained in Table V.

Perceived satisfaction level of the women microfinance borrowers

It is observed that out of total twenty variables only 2 variables have been ranked in the category of high satisfaction, 12 variables in the category of moderate satisfaction and the remaining 6 as of slight satisfaction. A majority of the respondents (70.3 %) perceived the Amount of loan availed to be yielding highest satisfaction having WAS of 4.30 and Repayment policy has been ranked at the lowest among the activities of slight satisfaction with WAS of 2.52. The study shows that women are not satisfied with the bank formalities like demand for collaterals, loan utilization checks, repayment policy. They experienced the procedural difficulties too, for getting the loan sanctioned, specifically while going for the formal sources of finance like banks.

Chi- square test

In order to determine whether there is a significant difference between the satisfaction level of those availing micro credit from the formal and the informal sources of finance. The following was the set of hypothesis: H0: There is no significant difference between the satisfaction level of formal and informal sources of micro credit. The above hypothesis was analyzed at 5 % level of significance. The calculated chi-square values have been presented in the table 5. Which is compared with the tabulated chi-square value at 5 % level of significance for 4 df i.e. 9.48

Chi- square test

There are six variables in column I of the table 4 whose calculated chi-square values are greater than the tabulated chi-square value (9.884) at 4 df. Therefore, null hypothesis is rejected for these six variables at 5 % level of significance. This is to mean that there is a significant difference among the satisfaction level of the formal and informal sources of micro credit with respect to the loan amount, rate of interest, loan utilization check, recognition and respect from the providers, availability of suitable products, complaints/ problems solving attitude of the providers. However, for the rest of the fourteen variables null hypothesis is accepted. Amount of loan availed is the variable showing the highest significant difference between the satisfaction level of formal and informal sources of micro credit. Loan duration is showing highest insignificance. Level of Impact This section of the article deals with the examination of the level of impact which the respondents observed after taking micro credit. All 54 respondents availing micro credit were asked to rate the activities showing impact on their lives of micro credit on five point Likert scale. The impact level has been analyzed by calculating the WAS for each activity

Level of impact on the women microfinance borrowers

It is observed that out of 9 variables not a single variable has been ranked as the activity of high impact. Interestingly only 1 activity has been ranked as of slight impact i.e. Awareness of social issues with WAS of 2.92 while rest 8 activities ranked as that of having moderate impact. This shows that microfinance has been able to mark some impact on the lives of the women clients as they reported improvement in their in their communication skills, decision making power and the confidence level. But still there is a long way to go before the microfinance may lead to sustainable women empowerment.

Level of impact on the women microfinance borrowers

FINAL CONCLUSION
The study found good saving habit among females as maximum number of the respondents was having saving bank accounts (46.9%) and post office savings (18.4 %) but still there are so many obstacles in the way of financial inclusion of women such as the lack of awareness regarding micro financing services being provided by the banks as 80.7 % of the respondents were unaware of the banks opening of 0 minimum balance saving bank account. The dissatisfaction from various service activities followed by banks such as requirement of collaterals, inconvenient procedural formalities, loan utilization checks and difficult repayment terms is also one of the major reasons for a significant proportion of the rural women to prefer informal sources of finance(74.1 % of the respondents availing credit) instead of the formal ones. They find an ease in getting finance from their personal contacts. This attitude needs to be changed. The banks should introduce some proactive strategies primarily aiming at spreading more awareness of the micro financing services available with the banks and encouraging the use of such services. More interestingly, despite of the prevailing dominant SHG-Bank linkage model, the study found very negligible use of the SHGs services by the respondents (2.1 % in case of savings). These SHGs need to be regulated and supervised in order to keep them actively engaged in the microfinance movement. Moreover the banks should make provision of more services under the microfinance umbrella as per the requirements of women. Some attitudinal changes are required on part of the finance providers also to break the age old stigma of the gender discrimination. Women should be encouraged to take up entrepreneurial activities by giving them proper guidance and developing their business skills. Women empowerment to a great extent depends upon the economic empowerment of women and microfinance can prove to be a very powerful instrument of women empowerment in the times to come.