Sustainability of microfinance self help groups in India: would federating help

Sustainability of microfinance self help groups in India: would federating help?

The major form of microfinance in India is that based on women's Self Help Groups (SHGs), which are small groups of 10-20 members. These groups collect savings from their members and provide loans to them. However, unlike most accumulating savings and credit associations (ASCAs) found in several countries, these groups also obtain loans from banks and on-lend them to their members. By 2003, over 700,000 groups had obtained over Rs.20 billion (US$425 million) in loans from banks benefiting more than 10 million people. Delinquencies on these loans are reported to be less than 5 percent. Savings in these groups is estimated to be at least Rs.8 billion (US$170 million). Despite these considerable achievements, sustainability of the SHGs has been suspect because several essential services required by the SHGs are providedfree or at a significantly subsidized cost by organizations that have developed these groups. A few promoter organizations have, however, developed federations of SHGs that provide these services and others that SHG members need, but which SHGs cannot feasibly provide. Using a case study approach, Nair explores the merits and constraints of federating. Three SHG federations that provide a wide range of services are studied. The findings suggest that federations could help SHGs become institutionally and financially sustainable because they provide the economies of scale that reduce transaction costs and make the provision of these services viable. But their sustainability is constrained by several factors-both internal, related to the federations themselves, and external, related to the other stakeholders. The author concludes by recommending some actions to address these co

Microfinance programmes like the Self-Help Bank Linkage Programme (SHG) in

India have been increasingly hailed for their positive economic impact and the

empowerment women. This is based on the view that women are more likely to

be credit constrained, have restricted access to wage labour market and have

limited decision-making and bargaining power within the household.

This article argues that true women empowerment takes place when women

challenge the existing norms and culture, to effectively improve their well

being.

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 While doing so, it carefully interprets the World Bank’s definition of

empowerment within the South Asian contexts and makes comprehensible

distinctions between community driven development, efficiency improving

activities that are culturally considered to be  women’s domain and activities

which truly empower women. Based on this conceptual framework the results of

the Focus Group Discussions (FGD) and interviews analyze the activities through

which the Self Help Groups impact the lives of women in India. It is argued

that only a fraction of these activities are truly empowering for the participating

women, however, drawing inference from the household data, preliminary results

indicate that SHGs could be leading to empowerment of women

Concept of Empowerment

What do we mean by empowerment? When does the well-being of a person

improve? Nobel Laureate Amartaya Sen (1993) explains that the freedom to lead

different types of life is reflected in the person’s capability set. The capability of

a person depends on a variety of factors, including personal characteristics and

social arrangements. However, the full accounting of individual freedom goes

beyond the capabilities of personal living. For example, if we do not have the

courage to choose to live in a particular way, even though we could live that way

if we so chose, can it be said that we do have the freedom to live that way, i.e.

the corresponding capability? Another important point made by Sen (1990) is

that for measurement purposes one should focus on certain universally-valued

functioning, which relate to the basic fundamentals of survival and well-being

regardless of context. Taking the example of universally valued functioning

like proper nourishment, good health and shelter, Sen asserts that if there are

systematic gender differences in these very basic functioning achievements,

they can be taken as an evidence of inequalities in underlying capabilities rather

than differences in preferences.

Annas (1993) explains that two actual norms for human life exist globally: in no

society is it indifferent to the shape of ones life and what one can make of it,

whether one is a man or a woman. One’s sex may close some options completely,

or make them less available but it always makes a difference to what ones

options is over ones life as a whole. According to her, in a traditional society

norms for the lives of men and women are enforced strongly and there exists

actual division of activities and ways of living.

When we look at a society more traditional than our own, we systematically

perceive injustice in the ways in which the two norms impose different kinds of

life on men and women, however as soon as we position ourselves with regard to

a more traditional society it is obvious that injustice results from the existence

of two norms.

In the feminist paradigm, empowerment goes beyond economic betterment

and well-being, to strategic gender interests. As Mayoux (1998) suggests,

empowerment is a process of internal change, or power within, augmentation

of capabilities, or power to, and collective mobilization of women, and when

possible men, or power with, to the purpose of questioning and changing the

subordination connected with gender, or power over. Empowerment can range

from personal empowerment that can exist within the existing social order. Thus

this kind of empowerment would correspond to the right to make one’s own

choices, to increased autonomy and to control over economic resources. But self-p

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confidence and self-esteem also play an essential role in change. Empowerment

signifies increased participation in decision-making and it is this process

through which people feel themselves to be capable of making decisions and

the right to do so (Kabeer, 2001). Personal empowerment can lead to changes

in existing institutions and norms, however, without the collective empowerment

the personal empowerment and choices are limited, as Sen explains.

The nature of empowerment can be diverse, depending upon the parameters that

define the lack of power within the institutional framework in operation. North

(1990) points out that institutions are humanly devised constraints that shape

human behaviour and they structure incentives in human exchange, whether

political, social or economic. It is the social or cultural environment that results

in the varying degree of empowerment of different members of the society and

which are broadly determined by not only formal constraints, such as rules of

law, but also informal constraints, such as the codes of conduct.

Malhotra et. al (2002) constructed a list of the most commonly used dimensions

of women’s empowerment, drawing from the frameworks developed by various

authors in different fields of social sciences. Allowing for overlap, these frameworks

suggest that women’s empowerment needs to occur along multiple dimensions

including: economic, socio-cultural, familial/interpersonal, legal, political, and

psychological. Since these dimensions cover a broad range of factors, women

may be empowered within one of these sub-domains. They give the example of

“socio-cultural” dimension which covers a range of empowerment sub-domains,

from marriage systems to norms regarding women’s physical mobility, to nonfamilial social support systems and networks available to women. 

The World Bank defines empowerment as “the process of increasing the capacity

of individuals or groups to make choices and to transform those choices into

desired actions and outcomes. Central to this process are actions which both build

individual and collective assets, and improve the efficiency and fairness of the

organizational and institutional context which govern the use of these assets.”

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Thus, as the World Bank (2001) report confirms, societies that discriminate on

the basis of gender pays the cost of greater poverty, slower economic growth,

weaker governance and a lower living standard of their people. The World Bank

also identifies four key elements of empowerment to draft institutional reforms:

access to information; inclusion and participation; accountability; and local

organisational capacity.

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Can Microfinance Empower Women?

Self-Help Groups in India

83 Refer to Social capital, empowerment and community driven