Micro Credit and Women's Empowerment

by Dr. Sheela Purohit - rppurohit@roltanet.com

Editor's note: one lakh=100,000 and one crore=10,000,000


Before 1990's, credit schemes for rural women were almost negligible. The concept of women's credit was born on the insistence by women oriented studies that highlighted the discrimination and struggle of women in having access to credit. However, there is a perceptible gap in financing genuine credit needs of the poor especially women in the rural sector.

There are certain misconceptions about the poor people that they need loan at subsidized rates of interest on soft terms, they lack education, skills, capacity to save, credit-worthiness and therefore are not bankable. Nevertheless, the experiences of several SHGs(self-help groups) reveal that rural poor are actually efficient managers of credit and finance. Availability of timely and adequate credit is essential for them to undertake any economic activity rather than credit subsidy.

The Government measures have attempted to help the poor by implementing different poverty alleviation programmes but with little success. Since most of them are target -based involving lengthy procedures for loan disbursements, high transaction costs, and lack of supervision and monitoring. Banks often suffer from poor repayment leading to a high level of non-performing assets NPAs(non-performing assets).

Since the credit requirements of the rural poor can not be adopted on project lending approach as it is in the case of organized sector, there emerged the need for an informal credit supply through SHGS. The rural poor with the assistance from NGOs have demonstrated their potential for self-help to secure economic and financial strength. Various case studies show that there is a positive correlation between credit availability and women's empowerment.




    The promotional and developmental activities carried out by SIDBI aims at boosting the small-scale sector growth, employment generation and upliftment of rural poor. The micro credit scheme received a major thrust in terms of policy changes and credit, which are inevitable for the growth potential of micro-finance sector. The Micro Credit Scheme (MCS) was formulated and put into operation in March 1994.

    SIDBI plays an important role as an apex bank to provide financial services through an appropriate and responsive credit delivery system. Assistance is extended to well-managed NGOs for credit lending to rural poor with special emphasis on women to take up activities at a micro level. NGOs with good record of accomplishment are extended support services to improve their financial and managerial capabilities.

    During the period 1998-99, under the MCS an assistance of Rs.1413 Lakh was sanctioned to 32 Micro Finance Institutions/NGOs to benefit nearly 1.12 lakh poor mainly women for undertaking non-farm activities. Further the Government of India has sanctioned an aggregate assistance of Rs.171 lakh and released an amount of Rs.86lakhs.

    For channelling to 12 NGOs under SIDBI-GOI Trade Related Entrepreneurship Assistance and Development (TREAD) programme aimed at empowerment of women and capacity building requirements of MFIs. The MFIs may include NGOs and Community-Based Organizations (CBOs). So far, only three NGOs with a membership of over 8400 women have been assisted under the SIDBI-TREAD initiative.


    MVN is specially designed fund for economic empowerment of women. Training and employment opportunities are provided to them through creation of necessary infrastructure. Besides supply of improved inputs, production and technological improvements are also covered under the MVN scheme. The progress of this scheme has been noteworthy. By March 1997, 113 NGOs were supported benefiting over 14,000 women with an aggregate assistance of Rs. 499.69 lakhs.


A pilot project for linking SHGs with banks was launched by NABARD in 1992. The Reserve Bank of India (RBI) persuaded commercial banks, regional rural banks and cooperative banks to actively participate in the linkage programme. Under the RBI’s guidelines, banks were given permission to open saving bank account in the name of SHGs and relaxation of security requirements. Thus, an informal credit system was evolved with assistance from formal financial institutions. The agencies involved in the schemes were NABARD, banks, NGOs and SHGs members. The main objectives were to provide the following:

  1. Supplementary credit to SHGs
  2. Reduction in transactions cost for both banks as well as SHGs by reducing paper work
  3. To mobilize small savings among poor rural women
  4. To build mutual trust and confidence between banks, NGOs and rural poor
  5. To create healthy relations between SHGs members and the linking agencies
  6. Constant supervision and monitoring by banks through NGOs



    The women in Tirupati were mostly migrants from nearby areas backed by illiteracy, poverty and lack of basic amenities. They were involved in odd activities with fluctuating incomes. Against this background, women had major responsibilities of maintaining their families. This necessitated the need for a regular source of credit. The efforts were to identify and promote income-generating activities among women through a credit delivery system. The banks were initially persuaded to provide loans at Differential Interest Scheme. Despite good repayments, banks could not meet the growing demands for credit on a continuous basis and there was no scope for repeat loans.

    The Mahila Abyudaya Podupu Sangam is a self-managed group who generates financial resources through their own savings. Each sangam consists of 10 to 15 members belonging to a particular slum. The primary source of funds is from the savings of members and interest earned on loans extended. Each sangam creates a common fund in order to meet the operational cost. The repayment rate is 100 percent because of individual responsibility of each member. Apart from financial functions, sangam is a platform for women to interact and address to many of their day to day problems. The interactions between sangams resulted in the formation of an association called ‘Cluster Association’. Each sangam became a member of the same. The activities of the Association include; promotion of new sangams, resolution of conflicts within and between sangams, address to the common issues etc.

    The ‘Padmavathy’ which is a legal entity has certain objectives;

    • To mobilize funds from formal financial institutions to meet the larger credit needs of its members.
    • To promote formation of new sangams.
    • To motivate the members to manage the financial requirements independently without external subsidies.
    • To promote unity among women of different sangams to give them collective identity for collective action.

    Besides the above objectives, ‘Padmavathy’ functions as a forum for information and exchange of ideas among different sangam members. It also has the responsibility of reaching out to more and more of poor women by expanding its activities.


    ‘Padmavathy,’ which started its operations a decade ago, had 221 sangams and 2647 members by July 1996. The sangams have mobilized Rs.38.58 lakhs as savings `and Rs. 8.31 lakhs as common fund after having met their operational costs. The sangam members with their own savings have a sense of security and confidence.

    ‘Padmavathy’ sangam is the first organization linked under the informal banking programme of SIDBI. Initially, It availed a soft loan of Rs.4 lakhs from SIDBI with the purpose of promoting micro enterprises by women. This assistance had encouraged 200 women to start their own income generating activities. Because of a good repayment experience, SIDBI had sanctioned a second loan of Rs.5 lakhs also a grant for training members for better credit utilization.

    It is true that sustainability of any development initiative is possible only when the participants change their role from passive recipients to active own managers. The ‘Padmavathy’ experience has proved it through commitment to work sincere efforts to share the benefits of development, active involvement of several sangam members. The model further proves the fact that poor are bankable and the timely access to credit can bring about changes in the lives of thousands of poor women. The sangams have been successful in obtaining loans on reasonable terms with simple procedures. They have also been instrumental in motivating many members who were earlier idle, in taking up some economic activity. Thus, the experience of this model is a source of inspiration for many other poor women with the similar socio-economic conditions.



    The RASS was established in 1981 at Tirupati. The activities and programmes of RASS were designed for the development of poor in the drought prone Rayalaseema districts of Andhra Pradesh. This region has a high percentage of population who belong to scheduled castes and the backward castes. The region does not have any major industries except a few agro-processing units. It also lags behind other regions of the State in terms of basic amenities. The rapid growth of population has aggravated poverty, unemployment and environmental degradation in the Rayalaseema region. Some of the anti-poverty programmes proved ineffective, as it was more on target achievement rather than human development. Moreover, the rural poor were not involved from the stage of planning to the stage of implementation and evaluation of programmes meant for their upliftment.


    The main objective of RASS was to adopt such a strategy, which would bring into fold the poor in the development process .The RASS, believes in the following:

    1. Involvement of poor in the entire process of development from planning to monitoring.
    2. Identification of priorities by the poor themselves.
    3. Empowerment of women as a key to self-sustained development of the poor.
    4. Provision of community infrastructure as an essential pre-condition for self-sustained growth.
    5. Development of agriculture and related activities using local knowledge and local resources apart from modern techniques to reduce the incidence of poverty and unemployment.
    The RASS considers the following four interventions as crucial for the poor to reach the stage of social consciousness and empowerment.

    1. Human resource development (by way of massive education, skill upgradation, health services, safe drinking water, sanitation etc. for the disadvantaged groups)
    2. Economic development (through propagation of modern agriculture and technology, family based asset creating activities and waste land development)
    3. Attitudinal changes (to promote greater gender equality, self-reliance and environmental sensitivity)
    4. Self-management and momentum (for the promotion of saving and credit, community management of infrastructure, leadership and self-help).

    The core area of operation of RASS includes the districts of Cuddapah, Anantpur, Kurnool and Chittoor. The initial activities of RASS were concentrated in Chittoor district, which accounts for an estimated population of 4.3 million. Subsequently, these activities were spread to other districts of Rayalaseema.

    Over a period of eighteen years, RASS has been successful in building up a large administrative infrastructure and reaching out to the rural poor in the backward areas within Andhra Pradesh and in the States of Orissa and Tamil Nadu. Because of its involvement in multi-faceted activities, several funding agencies at the national and international level have shown interest and confidence in RASS. Starting with three program activities in eight villages with 15 staff members, RASS has acquired the status of a national level organization. During 1997-98, RASS had 32 programme activities with 3695 programme staff in 3540 villages operating in three States. The budget of RASS which was Rs.0.08 million 1981 had gone up to Rs.72.08 during the year 1998. Thus, RASS has recorded a phenomenal growth for the past eighteen years.


    To tap the potentialities and managerial capacities of rural women RASS has implemented several activities. RASS has been instrumental in organizing rural women to show their strength and defend themselves for their rights with the formation of Mahila Mandals. These Mandals work under the direct supervision and guidance of RASS and also, get regular information about Government programmes, bank financing, marketing trends etc. The successful working of Mahila Mandals has resulted in the formation of a large number of Self-Help Groups (SHGs).

    For women to get gainful employment especially belonging to SC, ST and BCs, RASS provides training facilities and generates innovative programmes. The vocational skills, thus acquired, help women to be self-reliant.


    The successful working of Mahila Mandals has resulted in the formation of a large number of Self-Help Groups (SHGs). In 1990 with the help from RASS, 30 SHGs were formed involving 10-15 women members. Within a year, there were 123 SHGs with a total membership of 1559 women. A significant feature of this system was that a large number of women shifted their borrowing from traditional moneylenders to SHGs at reasonable rates of interest. Moreover, RASS has linked with Rasthriya Mahila Kosh (RMK) and NABARD to mobilize funds. RASS has borrowed about Rs.7million from RMK and lent it to informal women groups. Along with the loan from RMK and their own savings, women groups have generated credit to the extent of Rs.11million. Some of the notable features of this scheme are a high percentage (96) of repayment, utilization of funds for income creating activities and generation of saving by women members in the SHGs.

  • Lack of support from male members (of the families) as well as banks
  • Large magnitude of the target group of poor people
  • Attitudinal rigidities
  • Difficulty in creating awareness among people
  • Limited resources with the NGOs
  • Large requirements of training and sensitization of issues
  • Limited number of experienced intervention agencies
  • Diversities of situations due to wide coverage
  • Use of resources (credit) for income generating activities
  • Adoption of non-traditional activities
  • Improvement in the income levels of SHGs members
  • Nearly 100% recovery of loans
  • Generation of small savings in the rural sector among women
  • Use of local knowledge and resources in productive activities
  • Reduction in transaction cost for both banks as well as SHGs
  • Maintenance of minimum records in the form of registers
  • Maintenance of proper accounts by the SHGs
  • Regular meetings of the SHGs members to tackle problems among themselves
  • Healthy relation and coordination between SHGs, NGOs and banks
  • Grant assistance by banks to NGOs for capacity building (towards strengthening and monitoring of SHGs, training, computerization, etc.)
  • Support services to NGOs by banks for networking with other smaller NGOs
  1. NABARD, 1997. 'Micro-Finance Innovations and NABARD'.
  2. RASS, 1998. 'Partners in Progress – Organizing Communities for Development'
  3. RASS, 1998. Awakening Gender Potential – The SHGs Way.
  4. SIDBI, 1999. Annual Report 1998-99'.
  5. SIDBI, 1997. Development Report, October 1997.
  6. Sri Padmavathy Mahila Abyudaya Sangam, 1996. Community Banking – Our Gurthimpu.
  7. Sri Padmavathy Mahila Abyudaya Sangam, 1996. Training Manual for Community Banking.

Hari Srinivas - hsrinivas@gdrc.org
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