Microfinance: The crusaders for women’s economic empowerment

The future of humanity rests on the successful implementation of the 17
Sustainable Development Goals (SDGs) adopted by the United Nations in 2015. It is a universal call
to action to end poverty, protect the planet, and ensure that by 2030 everyone enjoys peace and
prosperity. However, such diverse goals are unlikely to be realised unless the world can achieve
higher gender parity through greater financial empowerment of women.

Even the SDG (Goal 5) speaks about achieving gender equality and economic empowerment of
women to create a more equitable and sustainable society. Empowerment of women is possible
through financial inclusion, which has long been denied to them for various reasons.
Studies have shown that access to savings and credit facilities increases women participation in
decision making. It also enables women to increase expenditure on their own well-being as well as
that of their children. It prevents the leakage of household income into unproductive and harmful
activities. Other welfare interventions are better nutrition, health and literacy campaigns and
enhancement of skills.

Additionally, the status of women within the community is also enhanced. Group formation among
women further reinforces these changes, leading to more significant socio-political transformation.
Financial inclusion also helps improve the creditworthiness of women by providing them access to
bank accounts and access to formal financial services such as credit and insurance.
Microfinance institutions, the Government, other institutions such as NABARD (National Bank for
Agriculture and Rural Development), and self-help groups (SHGs) have played a critical role in
helping marginalized women achieve financial empowerment. They have addressed and continue to
meet the unique challenges and barriers women face in accessing financial services and products,
such as lower levels of financial literacy and limited access to collateral.

Researchers argue in their paper that microfinance has given rural women an excellent opportunity to
attain reasonable economic, social, and cultural empowerment, leading to better living standards and
quality of life for participating households. Other experts have highlighted the various benefits of
microfinance by arguing how microcredit has played valuable roles in reducing the vulnerability of the
poor through asset creation, income and consumption smoothing, provision of emergency assistance,
and empowering and emboldening women by giving them control over assets and increased self-
esteem and knowledge.

Moreover, microfinance entities focus more on women borrowers as they have a better track record of
making timely repayments, thereby reducing the credit risk of these companies. They also contribute
a significant portion of their income to household consumption, thus creating a solid business and
public policy case for targeting female borrowers.

Sharing his thoughts, Dr. Alok Misra, CEO & Director, MFIN, said, Microfinance services are
primarily extended to women through JLG (joint liability group) lending, where women are at the core
of its delivery model. And in doing so, not only does the industry position her centre stage in her
household but empowers her to run it. The industry enables poor women to engage in income-
generating activities that help them become financially independent, strengthen their decision-making
power within the household and society. Besides equal rights to economic resources, and financial
services, the industry also promotes empowerment of women through technology. Credit and digital
literacy go hand in glove in today’s technology-driven world.

The phenomenal growth in its business and impact on the country is best exemplified through
numbers. As of September 30, 2022, the Microfinance loan portfolio stood at INR 3,00,974 crores
serving 6.2 crore unique borrowers, according to a report by MFIN - MFIN Micrometer Q2 FY 22-23.
Today, the microfinance industry has been accepted as a critical part of the national financial
architecture, playing a pivotal player in meeting the needs of low-income aspirational below-the-
pyramid households by providing doorstep financial services like credit, insurance, and other non-
financial services as well.