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Why may impacts be greater when lending to women?

Microfinance programmes such as the self Help Group (SHG) Bank Linkage Programme in India have been increasingly promoted for their positive economic impacts and the belief that they empower women. Within the South Asian context, women’s empowerment is defined as the process in which women challenge existing cultural norms within the societies in which they live to improve their wellbeing effectively [1].

The concept of microfinance includes provision of thrift, credit, insurance and money transfer facilities of small amounts to poor to enable them to raise their income levels and thereby their living standards. Since poor have low value assets with more often flimsy title to their assets the banks do not lend them credit because of high-perceived risk associated with such lending. Microfinance providers who are engaged in helping the poor have overcome this barrier of collateral by adopting a unique mechanism of group lending. Therefore, microfinance lending is commonly referred to as group-based lending[2].

Although commercial microfinance implies more of a business activity without special reference to social development, the evidence from many countries shows that microfinance may bring about a certain degree of all round social development could be attributed to three factors[3]: Firstly, group based microfinance creates a sustainable system of empowerment and a tendency among the borrowers to be self-reliant through efficient recycling of funds which could not be accomplished by direct finance to individuals; Secondly, it brings small loan recipients into the formal financial fold without grant or free money. Lastly, microfinance builds the capacity of borrowers to access formal finance on a regular basis at least cost of borrowing. This encourages poor, over a period of time to move to a stage where they are exposed to more choices of availing of finance.

Evidence suggests that lending to women yields greater social and economic impacts than lending to men. Policymakers have long been aware of the potential impacts of delivering aid for disadvantaged household to women. Food stamps in the United Kingdom and Sri Lanka, for example, and staple food and cash deliveries under the PROGRESA (now called Oportunidades) program in Mexico were directed to women rather than their husbands. The fear is that if such aid was given to men, they might sell the food stamps and misspend the resources—possibly wasting money on gambling, tobacco, and alcohol. Schreiner, Mark, and Jonathan Morch  (2011)[4] reports that Oportunidades in rural Mexico indeed led to sharp social improvements: poverty decreased by ten percent, school enrollment increased by four percent, food expenditures increased by eleven percent, and adults’ health (as measured by the number of unproductive days due to illness) improved considerably as well.

Similarly, Thomas (1990) reports that child health in Brazil (as measured by survival probabilities, height-for-age, and weight-for-height) along with household nutrient intakes; tend to raise more if additional nonlabour income is in the hands of women rather than men. With respect to survival probabilities, income in the hands of a mother has, on average, twenty times the impact of the same income in the hands of a father. In a subsequent study, also on Brazil, Thomas (1990)[5] reports that increasing the bargaining power of women is associated with increases in the share of the household budget spent on health, education and housing as well as relationship between a mother’s and father’s income on child nutritional status (height-for-age, weight-for-age and weight-for-height) for hundreds of household in Guatemala, and reports that children’s welfare improves as women’s earning power increases relative to their husbands’. William (1990) [6]finds that in Thailand nonlabour income in the hands of women tends to reduce fertility more than nonlabour income has different effects on labor supply’ depending on which household member actually controls that income.

Reports on a survey of hundreds of women in Kenya showed that an overwhelming majority of women responded that the principal forming social norms and traditions. Jones (1999)[7], for example, reports on a survey of fifteen different programs in Africa, Finding that the degree of women’s empowerment is household and region-specific, and thus, she argues, depends on inflexible social norms and traditions. The finding have to be weighed against ha fact that impacts on empowerment will, of course, also depend on how well the particular program was designed.


  1. Ranjula Bali Swain (2007), Impacting women through social services: the Self Help Group Bank Linkage Programme in India and its effect on women’s empowerment, Prentice Hall, New Delhi.
  2. Gurusamy (1990), Financial Services, Tata McGraw-Hill, New Delhi.
  3. Stuart Rutherford (2000), The Poor and Their Money, OUP, New Delhi.
  4. Schreiner, Mark, and Jonathan Morch  (2011)¸ “Opportunities and challenges for Microfinance in the United States, Edited by James H. Carr and Zhong Yi Tong, 19-51. Washington, DC. Woodrow Wilson center Press.
  5. Thomas (1990), A billion bootstraps: microcredit, Barefoot Banking, and the Business Solution for ending poverty. New York: McGraw-Hill
  6. William (1990) Giving: How each of us can Change the world, 27-28. New York
  7. Jones (1999), Representing the poor and homeless, Louis Publication, USA.

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