Women's Entrepreneurship and Microfinance

214 Pages·2017·2.14 MB·English

by  Chiranjib Neogi

Chiranjib Neogi
Amit Kumar Bhandari
Sudipto Ghosh Editors
Women's
Entrepreneurship
and Microfinance
’ fi
Women s Entrepreneurship and Micro nance
Chiranjib Neogi Amit Kumar Bhandari
(cid:129)
Sudipto Ghosh
Editors
’
Women s Entrepreneurship
fi
and Micro nance
123
Editors
Chiranjib Neogi Sudipto Ghosh
Indian Statistical Institute Government of WestBengal
Kolkata, West Bengal Kalyani, West Bengal
India India
Amit KumarBhandari
Rishi Bankim Chandra EveningCollege
Naihati, West Bengal
India
ISBN978-981-10-4267-6 ISBN978-981-10-4268-3 (eBook)
DOI 10.1007/978-981-10-4268-3
LibraryofCongressControlNumber:2017940358
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Foreword
Thisvolume,editedbyNeogi,Bhandari,andGhosh,fillsalong-standinggapinthe
literature on gender issues in development in terms of the impact of microfinance
institutions and other public programs, such as MGNREGA (Mahatma Gandhi
National Rural Employment Guarantee Act) and NRLM (National Rural
Livelihood Mission) programmes, on women empowerment. The nation at large
continues to suffer because women do not enjoy the freedom of choice and privi-
legesthataresupposedtobeavailabletoallcitizensofthecountry.Severalpublic
programs and institutions, such as microfinance, explicitly and implicitly target to
improve the ability of women to function in an economy that boasts of being the
fastest growing in the world. Chapters in the volume apply modern techniques,
rigorous empirical evidence, and well-framed hypotheses to look deeper into the
policy impact for the country and specifically for West Bengal. We often forget a
critical point that policy makers need to be educated and updated continuously
about the outcomes of the policies, and one must use the right kind of indices to
assess the true state of affairs. Anyone, from policy makers to students, who is
interested in women empowerment as a tool for improving his or her role as
economic functionaries of the system and feels the necessity of going beyond the
rhetoric and ribbon-cutting initiatives, will learn much from this volume. It goes
without saying that the lead editor and many of the contributors are seasoned
campaigners and very competent economists. I am confident that this volume will
be a wonderful addition to the literature on gender and development.
Sugata Marjit
RBI Professor of Industrial Economics
Centre for Studies in Social Sciences
Calcutta (CSSSC) Member
State Public Policy and Planning Board
Government of West Bengal
Former Vice Chancellor
University of Calcutta
v
Preface
In current times, women entrepreneurship is being regarded as an effective com-
ponentofsustainableeconomicdevelopment.Inmanydevelopingcountries,where
societies are male-dominated, gender discrimination is noticed with respect to
income,education,propertyrights,andotherhouseholdissues.Themale-dominant
social order is a major roadblock faced by women in their way towards entrepre-
neurial initiatives. Gender equality is an essential component of economic growth,
enablingwomentobecomemoreeffectiveeconomicactors.Oftenwomenhavenot
onlyprovedtobebetterrepayersofloans,butalsobettersaversthanmen,andmore
willingtoformeffectivegroupstocollectsavingsanddecreasecostsofmanysmall
loans. Women, who are confident, make a good livelihood and household deci-
sions, have control over resources, and can use larger loans effectively to increase
their incomes, are considered potentially very good long-term clients. They can
accumulate substantial savings that could then be channeled into insurance and
other financial products. Women’s use of financial services can increase their
income and economic security, enhance their independence, reduce the vulnera-
bility of their families, and stimulate local economies. Making financial services
available to women clients, without adapting those services to the special con-
straints and coping strategies that arise from women’s multiple social roles, often
leads to loss of opportunity to achieve both significant outreach andeconomic and
socialempowerment.Availabilityofsuchfinancialservicesmightenablewomento
start their economic activities, acquiring assets by investing the money borrowed.
Microfinance has been accepted as a potent instrument to improve living stan-
dards of the ultra-poor women in developing and least developed countries. The
basicargument,infavoroflendingouttowomen,isthattheyaregoodcreditrisks,
are less likely to misuse the loan and are more likely to share the benefits with
others in their household, especially their children. In addition to the economic
benefits, it is argued that the increasing role of women in the household economy
will lead to their empowerment. During the past few decades, microcredit has
enjoyed tremendous growth, and women continue to be the major beneficiaries.
Impact evaluation studies routinely find that lending to women benefits their
households. However, some of them also find that this may not necessarily
vii
viii Preface
empower the women concerned. In the impoverished settings in which microfi-
nance projects operate, kinship ties and marriage play an important role in pro-
vidingindividualswithlegitimateclaimsoverhouseholdandcommunityresources,
together with vital access to insurance networks in times of crisis. It is argued that
cooperation and jointness of decision making may be more desirable for women
than autonomous control over resources. This perspective has important implica-
tions regarding our understanding of the empowering potential of microfinance
programs. If new economic opportunities lie outside the traditional realm of the
female spouse and exit options for women are severely limited, then she may be
betteroffignoringthemtopreservehersocialtieswithinthecommunity.Forthese
reasons, an intervention that requires cooperation of both spouses may be more
successful in achieving wider social impacts than interventions that focus on
women’s autonomous spheres only. In the context of microfinance, this reasoning
suggests that women who receive complementary business training in an activity
that ensures their husbands’ cooperation are more likely to benefit from access to
credit than those who receive training in an autonomous productive activity that
they can undertake independently within the household. Critics of microfinance
doubt whether this has a positive impact on women empowerment. Many micro-
financeschemeshaveaclearfocusonwomen.Womenuseamoresubstantialpart
oftheirincomeforhealthandeducationoftheirchildren.Thus,womenplayavery
important role in reducing poverty within households. However, critics argue that
often women are forced to hand over the loan to men, who subsequently use the
loanamountfortheirpurposes,whichmayleadtoanadditionalburdenforwomen
if they are held responsible for the repayment.
Women in rural areas have inherent skills and are often adept at making
handmade products with easily available raw materials. With few employment
choices, women often start businesses in highly saturated sectors, in the informal
economy with low-productivity and low-return activities. For many rural women,
entrepreneurship is part of a broader livelihood strategy, often undertaken on a
part-time basis. However, financial institutions are sceptical about the entrepre-
neurial abilities of women. Despite evidence that loan repayment rates are higher
amongwomenthanmen, womenstillfacemoredifficultiesinobtainingcreditdue
to the discriminatory attitude of financial institutions. It is noticed that only a
minuscule percentage of women who had taken a loan for income-generating
activities have autonomous control over the loan money. In maximum instances, a
male member of the family enjoys the control of loan proceeds. Given this back-
drop,thisvolumeseekstounderstandtheinfluenceandimpactofmicrofinanceon
women’s entrepreneurship and empowerment within developing countries.
ThefirstchapterbyChaitiSharmaBiswasdepictsthatmostIndianwomenhave
a medium-level empowerment in the family. A very small percentage of women
have high level of empowerment, which is normal in a patriarchal society; the
percentage of women having a low level of empowerment is also surprisingly
modestinIndia.Majorityofwomenhavemedium-leveleducation,whichisoflittle
use because most of the respondents remain unemployed. Thosewho optfor ajob
are mainly engaged in manual or unskilled jobs, indicating that in a patriarchal
Preface ix
society, social norms are so rigid that medium or higher education fails to involve
women in the job market. To ensure high-level empowerment, women must be
engaged in high-level jobs which in turn require them to be highly qualified. High
qualification and high-level job simultaneously create greater confidence among
women, which ultimately helps them to make choices. Moreover, if they earn as
muchasormorethantheirhusband,thentheirlevelofconfidencewillincreasetoa
greatextent,whichinturnwillincreasetheircontrolonhouseholddecisionmaking.
In the second chapter, Subhendu Chakrabarti aims to develop a generalized
empowerment index through an axiomatic approach taking into account thevaried
levelofindividualempowermentforeachattributewithinthespecificcontext.The
index has been constructed by calculating simple average of the level of empow-
erment along individual attributes. It is revealed from the analysis that the level of
women empowerment significantly differs among states, and within and between
zones. Each zone represents some degree of social and cultural homogeneity, and
these social and culture systems consist of rationale norms, values, and beliefs on
which there is simultaneous consensus and disagreement, and which are subject to
change. Based on an application of the empowerment index, one can identify the
factordominanceandthenplanaccordingly.However,emphasisonlyonthesetwo
factorswillbelesseffectiveinasocietywherereligious and/orculturaldominance
is very high.
In their contribution, Arghya Kusum Mukherjee and Amit Kundu highlight the
roleoftraditionalinstitutionsandfemalebeneficiariesofMahatmaGandhiNational
Rural Employment Guarantee Act (MGNREGA) in West Bengal. Given the sim-
ilarity in the socioeconomic characteristics of household across social groups, the
difference among the groups in their response to MGNREGA participation is
enormous. One possibility is that MGNREGA has attracted a highly selected
sample of upper caste (UC) women who were especially responsive to
MGNREGA. If social restrictedness creates bottlenecks for knowledge, and par-
ticipationinMGNREGAallowedUCwomentochallengeexistinggendernormsto
enhance theiragency, thenthequestionarises,why Muslimwomen, whoaremost
fettered by social norms, did not respond more to the MGNREGA than scheduled
caste (SC) women did. One explanation of the author’s result is non-monotonicity
in the effect of social restrictions. Participation in MGNREGA helped women
whose agency had been held down by social restrictions, but women subject to
extreme oppressions had too little agency to change desire or deeds.
In the chapter titled “Empowerment of Women Through Public Programs in
Rural West Bengal: A Study on National Rural Livelihood Mission in a Block of
Purulia”, Tithi Bose and Archita Ghosh investigated the empowerment of women
throughpublicprogramsadoptingavillage-levelsurveyinWestBengalandfound
thatinvolvementinagroupcanhaveabigimpactonwomenempowerment.Loans
fromthegroupscanbeagreatsourceofself-employmentforthewomeninvolved,
which develops self-esteem among women, helps to raise their voices against any
corruption, and uplifts their position in their families. Women associated with
groups are comparatively more aware and, therefore, manage to get panchayat’s
assistance for sanitation and electrification facilities. They do not find any
x Preface
enhancement in expenditure as a result of group association or group loans.
Nevertheless, groups and group loans have highly impacted economic empower-
ment.Grouploansandassociationwithgroupshavesociallyempoweredwomenas
women associated with groups can stand beside other women, influence family
decisionsinabettermanner,participatemoreinpublicandpoliticalgatherings,and
engagethemselveswithdifferentsortsofsocialgatherings.Membersofgroupsthat
are not organized properly to make the members aware of new features are losing
interestinsuchgroups.Alltheimplementingagenciesshouldworkinacoordinated
manner to develop self-help groups (SHGs) and make their members truly eco-
nomically self-empowered.
In their contribution Aparajita Dhara and Biswajit Chatterjee attempt to inves-
tigatethetrendsanddeterminantsofnon-farmemploymentamongwomeninrural
India. As the share of agriculture in gross domestic product (GDP) decreases with
economicgrowth,sodoesitsshareinemployment.Overtimethisleadstoashiftin
the rural occupational structure towards different non-agricultural and non-farm
activities. A vibrant rural non-farm sector has the potential of reducing disguised
unemploymentinagriculture,forced-migrationtowardsurbancentres,ruralpoverty
andruralincomeinequality.However,theextentofitssuccessdependsonwhether
such livelihood diversification is driven by growth-related ‘pull’ factors or
distress-driven ‘push’ factors. Based on data from the quinquennial surveys on
‘Employment and Unemployment Situation in India’ carried out by the National
Sample Survey Office and other official sources, the chapter analyzes the deter-
minants of non-farm employment among the female workforce in rural India,
segregated by industrial subsectors and employment status, during the two
post-reform decades from 1990 to 2010. The results point towards some existence
ofdistressfactorsandmuchregion-specificheterogeneityinthedynamicsinvolved.
In the chapter “Efficiency and Mission Drift—Debate Revisited in Indian
Context”, Chandralekha Ghosh and Samapti Guha highlight twin objectives of
microfinance institutions (MFIs), serving the poorest clients and becoming finan-
cially self-reliant. This chapter examines the technical efficiencies and cost effi-
cienciesofMFIsinIndiancontextusingstochasticfrontieranalysistogetanideaof
mission drift mainly by studying therelationship of efficiencies on a percentage of
woman borrowers and the average size of the loan. The authors have obtained
efficiencies of 86 Indian MFIs for the period 2010 to 2014. It was observed that if
theloansizeincreases,bothtechnicalandcostefficienciesareincreased,whichisa
case of mission drift. The experienced MFIs and the MFIs who own the assets
achieveboththeefficiencies.TheincreaseinloansizeestablishesthefactthatMFIs
whogainefficiencyregardingoperationaredivertingtheirobjectiveofservingpoor
clients.
In the chapter titled “Microfinance and Human Development: A Cross-
Generation Study”, Arijita Dutta and Sharmistha Banerjee assess the impact of
microfinance on education and career choice of the second generation of microfi-
nanceusers,daughtersanddaughters-in-law,comparedtotheoriginalmicrofinance
borrowers and non-borrowers. These strategic life choices normally include their
children’sschoolingandeducation,theirownhealthcareoptionsandabilitytoearn
Preface xi
and spend according to their will. This chapter aims to capture the impact of
microfinance use by 1200 middle-aged women on the overall human development
of women of their next generation.Using propensity score matching techniques of
impactevaluation,thechapterrevealsthatamongthesecond-generationwomenof
microfinance borrowers, neither education nor income-generating activities appear
to be statistically higher compared to that of non-borrowing control groups. Thus,
theimpactofmicrofinanceseemstofizzleoutwithoutsustainability,representinga
sure sign of mission drift.
In his chapter, Avijit Brahmachary investigates the challenges of financing
women-owned businesses in India. The formal financial sector generally assumes
thatprovidingsmallloansanddepositservicestothezero-collateral-basedunbanked
people would be unprofitable because of the asymmetric information about the
creditworthiness of the borrowers and due to the high transaction costs associated
withthedeliveryofsmall-scalefinancialservices.InIndia,thesupplyoffinancefor
such small businesses is very low; since these businesses mostly belong to the
informal unorganized sector, they are hardly able to manage adequate suitable
financefromformalsourcesfortheirsmallset-ups.MicrofinancethroughSHGsmay
put some solution with respect to the supply offinance and protects these people
fromtheusuriousmoneylenders.Inthischapter,theauthorattemptstoanalyzethe
major problems of women-owned small businesses in India and the role of
group-based microfinance to accelerate such businesses providing small finance.
The study reveals that most women in India choose to set up a business as a
professionjustduetothenecessityofthefamilyand,therefore,arenotwellprepared
to face different social and financial problems related to it. Although the microfi-
nance program along with different pro-poor financial initiatives has been initiated
by the government and other private agencies from time to time to overcome such
problems, thesupply ofsuch initiatives islaggingfar behind the total demand.
In the chapter “Going Through the New Avenue of Life: A Study on Factors
WorkingBehindEntrepreneurshipDevelopmentThroughSelf-HelpGroup”,Kallol
Dasinvestigatesthefactorsworkingbehindentrepreneurshipdevelopmentthrough
an SHG. Development of the society is directly related to the income-generation
capacity of its members. Women’s entrepreneurship contributes to the economic
well-being of the family and communities. The number of women enterprises has
grown over a period through SHGs, thus empowering women and enhancing their
positioninsociety.Itisanimportantmechanismofgrassrootsprogramsthattriesto
bringpositivechangebyworkingdirectlywithpoorwomen.Thischapterdiscusses
some important factors working behind the successful running of microen-
trepreneurial activities and investigates the reasons for which other SHGs are
unable to run their business. The chapter also shows how SHGs help women
change their life in a positive manner through microentrepreneurial activities.
Inthechaptertitled“AccesstoFinance,Entrepreneurship,andEmpowerment:A
Case Study”, Sudipto Ghosh and Chiranjib Neogi provide a detailed investigation
on the effect of women empowerment on the control of resources and decision
making.Accesstomicrocredithasledtotransformationinthesocialrecognitionof
women’sdomesticlabour force.Thebasicobjectiveofthischapteristoassessthe