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Microfinance and Women Empowerment

Updated: Mar 11, 2020

by Samira

It’s been the dream of every Indian to live to see that day when India finally becomes a superpower. While India is still on the right track, it has in the process many more hurdles to cross, one of which has been the challenge of gender inequality. While many formulae have been tried and tested to combat this issue, Microfinance stands out for its success story.

The term Microfinance, might give one an idea of financial services like loans, of a smaller amount. While this holds true, such a perspective only covers a part of microfinance called microcredit. Microfinance is a larger concept which, along with microcredit also includes savings, insurance, transfer services and other financial services targeted at poor and low- income clients who do not otherwise have access to them.

How does microfinance combat gender inequality? It combats gender equality by empowering women. It works towards financial sustainability and poverty alleviation of women, as increased access to such financial services helps to promote income generating activities among women. One might point out that this would only help in the economic empowerment of women and empowerment should also mean political and social empowerment of women. But social and political empowerment are slow and gradual processes that start from economic empowerment. Economic empowerment leads to greater participation and better decision making. Greater independence has also led to greater social assertiveness among women, with increased efforts by them in combating other social issues like drinking, gambling etc.

The idea of microfinance has been successful in India mainly through self-help groups, established with the support of both the Government as well as the NGOs (Jain and Jain n.d.). While microfinance helps directly in economic empowerment, the concept of self-help groups also help in social and political empowerment as all the members are involved in the decision making process and also together fight against social evils they face.

The best example of women empowerment through microfinance can be seen in Kerala, through the Kudumbasree project initiated in 1988, jointly by the Kerala Government and NABARD (Ruby 2008). The project that started with just a few thousand women, today has close to 3.7 million members and a total of 16.9 billion rupees for thrift. The Kudumbasree project encourages women to run their own businesses, including taxi services, small paper mills and handicraft shops. At the grassroots level, it works through local neighbourhood groups, where women accumulate their savings in the form of thrift. While this forms the initial investment, the state government also provides grants and administrative support while state and private banks also grant loans at very low interest rates. The programme has been stated as a success over the years and in 2002, in a study conducted by the United Nations Development Programme, it was recognised as one of the 20 best practices in India in governance (Varma 2014).

While microfinance faces many challenges in the form of state imbalances and lack of capital,in terms of women empowerment the challenge is of understanding the category of women. While collective empowerment is the aim, treating them as a homogeneous group is not enough. It is important to listen to the different clients and understand their resource bases, strengths and vulnerabilities (Kulkarni n.d.). Evidence has shown that in India, microfinance has helped in the empowerment of women. Thus, it has immense scope for further expansion and will prove to be one of the best initiatives to battle gender inequality.


Jain, Dr.Dhiraj, and Dr. Bhagyashree Jain. “Does Microfinance empower rural women?Anempirical study in Udaipur District, Rajasthan.” (accessed June 28, 2014).

Kulkarni, Vani S. “Women’s empowerment and Microfinance, An Asian Perspective study.”

Ruby, J.A. “Microfinance and Women Empowerment- A study of the Kudumbasree project in Kerala.” July 9, 2008.

Varma, Vishnu. A Rare Government Success Story for Women’s Empowerment in Kerala. Newspaper, Ernakulam: The Hindu, 2014.

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