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Micro credit for Women Micro Entrepreneurs


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									     Micro credit for Women Micro Entrepreneurs

Madhavi A Lokhande
Associate Professor
Welingkar Institute of Management
11, Emen Arcade, Krishnanagar Industrial Estate,
Hosur Road, Bangalore 560029
Tel: +91 80 41303781/82
Fax: +91 80 41303784
Email 1: madhavial@yahoo.com
Email 2: madhavi.lokhande@welingkar.org

Author Biography:

Madhavi Lokhande is currently working as Associate Professor (Finance) in Welingkar
Institute of Management Development and Research, Bangalore, India.
Her research interests include studies on Micro credit and Women entrepreneurs in the small
and medium enterprise sector.

                    Micro credit for Women Micro Entrepreneurs


 Paper Type - Research

 This paper aims to highlight the central role that Credit plays in the lives of Women Micro
 Entrepreneurs. It describes the current scenario of the woman and her enterprise,
 highlighting the emerging perspectives which should help policy makers, financial
 institutions, government agencies, training organizations, and Non Government
 Organizations to design and implement measures to facilitate entrepreneurship among
 women and ensure credit availability.

 Women make tremendous contribution to the economic development of any country and
 this contribution needs to be recognized. This paper attempts to look at the credit facility
 available for women today, to be able to start an enterprise, whether the women are aware
 of micro credit.

 Key Words: Women Entrepreneur, Micro credit, Empowerment of Women, Funding
 needs of Women Entrepreneur.

 Main Text

1. Introduction

       1.1 The research aim of the paper. Women make tremendous contribution to the

       economic development of any country and this contribution needs to be recognized.

       Women have been working in both the formal and informal sectors of the economy in

       several roles. The contribution of women in factories, fields, showrooms, offices,

       classrooms, and even homes has been sidelined. Empirical evidence shows that

       women contribute significantly to the running of family businesses mostly in the form

       of unpaid effort and skills. The value of this effort is underestimated both by the

       families and the society. It has also been observed that many of the enterprises

       defined as being run by women (that is, enterprises in which women hold the

       controlling share) are in fact being run in their names by men who control operations

       and decision making. Programs meant to reach women entrepreneurs can succeed

       only if they take note of this paradox as well as of the familial and social conditioning

that reduces the confidence, independence and mobility of women. A strong change

of traditional attitudes is required in order to promote entrepreneurship amongst

women. This is not as simple as creation of jobs for women as it involves a cluster of

activities such as societal change, attitudinal changes, group formations, training,

creation of subsidies, credit allocations and other support services for the women

entrepreneurs. Programs for encouraging entrepreneurship among women will fail or

be ineffective if they are taken up in isolation. This is because entrepreneurship by

definition implies being in control of one's life and activities. It is precisely this

independence that has been denied to women all along.

Micro credit, in the sense of small loans to the poor, is of ancient origin in India.

Traders and moneylenders have traditionally provided credit to the rural poor, usually

at high rates of interest. This led to considerable hardship and impoverishment of

borrowers, including undesirable and illegal practices like bonded labor. Microfinance

today does not include such exploitative practices. It is lending to the poor at

reasonable but sustainable rates. Microfinance provides an important way to balance

the outreach among the rural poor while keeping the cost of lending low. The costs of

credit risk assessment and monitoring can be reduced substantially and this in turn

will help the banks to actually reach out to a large number of truly poor households

without incurring heavy transactional expenses. Credit is available for women through

a plethora of schemes but there are still bottlenecks and gaps.

This paper aims to highlight the central role that credit plays in the lives of Women

Micro Entrepreneurs. The paper describes the current scenario of woman and her

enterprise. It also highlights the emerging perspectives which should help policy

makers, financial institutions, government agencies, training organizations, and Non

Government Organizations (NGOs) to design and implement measures to facilitate

entrepreneurship among women and ensure credit availability.

1.2 Background. Numerous statistics show that even during the years of economic

crisis and recession, the one robust sector providing economic growth, increased

productivity and employment has been that of Small and Medium-sized

Enterprises(SMEs). What is less known is that in many countries on an average up to

40 percent to 50 percent of such enterprises are owned and run by women, women

who are actual or potential owners of trademarks, service marks, trade name as well

as of industrial designs, patents and copyright. Women seeking to generate income set

up and develop a business. These women usually operate in micro Small and

Medium-sized Enterprises (micro SMEs) and Small and Medium-sized Enterprises

(SMEs). They are the driving force of most economies with a proven capacity to

innovate and to generate new ideas and technologies. This could be precisely the

reason why the micro credit services are targeting the women.

SME sector is the backbone of the economy especially in a developing country. There

is widespread recognition that SMEs play a catalytic role in the development process

of any country. They have always been the engine of growth in developing as well as

in transition economies. This can be established in the form of their increasing

number and rising proportion in the overall market of product manufacturing, exports,

manpower employment, technical innovations and promotion of entrepreneurial skills.

SMEs are major contributors to the Gross Domestic Product (GDP) of the country.

This sector, in India, is the second largest manpower employer after agriculture and

currently contributes 40 percent of the total industrial production in the country and

over 34 percent of national exports. In terms of socio-economic importance, the total

number of SMEs at 11.39 million units is nearly 5 percent of the industrial units of the

       country, while providing employment to nearly 27.13 million people, which is nearly

       86 percent of the total employment in the country. (Government of India statistics).

       1.3 The structure of the paper. Section 2 introduces SMEs, the Indian definition of

       SMEs, and also the contribution of SMEs in the development of the economy and the

       nation. It covers the mission statement, explaining the contribution and the need to

       fund this sector. Section 3 presents some academic perspectives on the micro credit

       scenario in India. Also included here are the micro credit regulations in vogue, and the

       need to adopt micro credit to fund the SMEs. Section 4 discusses how women are

       major actors in a global economy and importantly, how women are turning

       entrepreneurs by choice and not merely to improve their financial conditions. This

       section throws light on the contribution of Women Entrepreneur, and the challenges

       faced by them. Section 5 describes the research design and the course of the

       fieldwork. It explains the rationale for adopting qualitative study and also discusses

       the qualitative research methods used, their limitations and ethical considerations.

       Section 6 relates the stories of the real people, findings obtained from the interviews

       with beneficiaries and actors in the organization. In Section 7 the paper concludes

       with a discussion of the findings and accordingly recommendations for the program,

       as well as future research questions.

2. Definition of SMEs – A relative phenomena

There is no universal definition of SMEs. Some countries make the classification based on

certain objective standards, while few other countries use turnover of the company to

determine the size of the enterprise. The size is also a relative phenomenon with reference to

the local economies, since a large company in a small country could possibly be considered

as a small company in a larger country.

2.1 Indian SME definition. In the Indian context, the concept of Small Scale Industry

has been in vogue and the Medium Enterprise definition is of more recent origin. A

Small Scale Industry is defined on the basis of limit of historical value of investment

in plant and machinery, which at present is up to INR10 million. However, in respect

of some specified items, this investment limit has been hiked to INR 50 million. For

the recently announced Small and Medium Enterprises Fund the Government of India

has approved the limit of investment in plant and machinery above INR 10 million

and up to INR 100 million for defining a unit as a medium enterprise. Amongst the

developing countries, India has been the first to display special consideration to Small

Scale Industries and basic focus has been to make economical use of capital and

absorb the abundant labor supply in the country. (Definition of small-scale industry

and small business enterprises for purposes of inclusion in priority sector has been

changed in alignment with the definition adopted in the Micro, Small and Medium

Enterprises Development Act, 2006)

2.2 Contribution of the Indian Small Scale Industries. The Small and medium scale

industries of India (including the tiny industries and the small scale service and

business entities) have a long history of promoting economic growth that is

employment oriented and spatially widespread, and hence inclusive. In India, SME

sector is the second largest manpower employer, after agriculture and the output from

the SSI sector alone constitutes 40 percent share of the value added in the

manufacturing sector and one thirds of national exports. (Government of India

statistics) Within the SME sector, the small sector serves as a green field for nurturing

of entrepreneurial talent and helps the units to grow in to medium and large size. The

promotion of SMEs, therefore, becomes a major area for policy focus, both in

developed as well as developing countries. Over the years, the Small Scale Industrial

        sector in India has continued to remain an important sector of the economy with its

        noteworthy contribution to the gross domestic product, industrial production,

        employment generation and exports.

3. Micro credit in India

Despite recent gains in India’s micro credit sector, total financial inclusion is still a distant

prospect. There are several regulatory distortions in the Indian microfinance sector. However,

no distortion has such pervasive effects as the lack of transparency. This transparency deficit

lies at the heart of nearly all contentious issues in Indian microfinance regulation.

Government officials base crucial decisions on reports - which are outdated, and which are

kept hidden from public scrutiny. Micro Finance Institutions (MFIs) are alleged to tinker with

their non-performing loans to hide borrower defaults. Few of the MFIs exclude hidden

charges while disclosing interest rates. As the market lacks credible information, stakeholders

often suspect the worst of their counterparts. As an illustration, in the situation of borrower

default rates, central and state government officials assume that many MFIs conceal borrower

over-indebtedness by rolling over bad debt. This assumption then fuels political support for

interest rate caps so as to curtail lending to MFI borrowers and, therefore ease this borrower

debt trap. When MFI financials are credible, the scope for consensus-building on many

regulatory issues will widen considerably.

        3.1 Credit Scoring. Credit scoring enables banks to alleviate information asymmetry

        problems with regard to small scale industries. Credit scoring systems are better at

        assessing potential borrowers. Credit rating of clusters would aid not only the lenders

        but also the clusters themselves by providing information on wider market

        opportunities for their products, strengthen negotiability and adopt improved business

        practices and better quality control. Formulating and institutionalizing rating for

       clusters or standalone SMEs (through techniques such as balanced scorecard or

       appropriate software) is a key to rapid deployment of cost effective credit.

       3.2 Relationship lending. Another way of extending loans to SME is the relationship

       lending rule, where the lender partly bases its decision to lend on propriety

       information about the firm and its owner through a variety of contacts over time. This

       information is obtained through the provision of loans and deposits and other financial

       products. Additional information may also be gathered through other members of the

       local community, such as suppliers and customers, who may give specific information

       about the owner.

       3.3 Micro finance approach to SME. The A S Ganguly committee (The Consultative

       Group of Directors of banks and financial institutions set up by the RBI to review the

       supervisory role of Boards of banks and financial institutions) has observed that the

       traditional sources of credit flow to the SME sectors (through the public sector banks,

       specialized financial institutions etc.,) are unlikely to improve their services, at least

       in the short and medium term. The public sector banks have inherent problems in

       extending credit to the SMEs due to historical reasons. It is necessary to explore ways

       to overcome such traditional problems by financing Special Purpose Vehicles (SPVs)

       in the form of micro credit agencies dedicated to servicing SME clusters.

4. Women and SMEs

“Micro credit has created a revolution. When banks lent to the rich, micro credit programs

lent to the poor. When banks lent to men, micro credit programs lent to women. When banks

made large loans, micro credit programs made small ones. When banks required collateral,

micro credit loans were collateral free. When banks required a lot of paperwork, micro credit

loans were illiterate-friendly. When clients had to come to the bank, micro bankers went to

the clients.” Sam Daley-Harris, Director of the Micro credit Summit Campaign. In numerous

villages in India, poor women are today using small loans to rewrite their present and future.

Many of them are not even educated but are using their common sense to do group business

activities. The braver ones have entrepreneurial ventures of their own. Dr. C. Rangarajan,

Chairman, Economic Advisory Council of the Government of India, points out, "Micro credit

can aid employment and sustain households giving them opportunities they never had

before." It is called micro credit as the size of the loan is small and the borrower cannot

approach the banker. The hurdle for the borrower is his poverty.

       4.1 Background. World wide studies show that:

           •   70% of the world’s poor are women.

           •   Women are poorer and more disadvantaged than men. According to the

               official United Nations Development Program (UNDP) Human Development

               Report, 70% of the 1.2 billion people living on less than $1/day are women.

           •   Women have higher unemployment rate than men in almost all the countries.

           •   Women are major actors in the global economy. Women's roles as the farmers,

               traders, and informal sector industrialists are overlooked or undervalued.

           •   Women are also caretakers of the family. They put the needs of their families

               before their own. Therefore putting extra income in women’s hands is the

               most efficient way to affect an entire family. The children will not only

               complete their education escaping the poverty trap, they also look up to their

               mother as an educator and a facilitator.

           •   Studies show that men typically contribute 50% to 68% of their salaries to the

               collective family fund, whereas women tend to keep nothing back for

               themselves. Thus, investing primarily in women tends to benefit the family

               more as a whole.

   •   Women tend to be honest, practical and reliable. This results in a low

       percentage of business failures and loan defaults among women business


   •   Women have high values and understand the importance of security. This acts

       as a potential for mobilization of savings.

   •   Poor women can use the small loans to start a small business activity and keep

       expanding their profit base.

As the women have enormous pride in their integrity, they repay quickly and reliably,

not wanting to be seen as defaulters. (Source: UNDP, 1995 Human Development

Report (New York, UNDP, 1996)

Access to finance and economic participation is the key to building a woman's

confidence and will help her leverage her time and talent to transform herself, her

family and the enterprise she is heading. Giving women access to micro credit loans

therefore generates a multiplier effect that increases the impact of a microfinance

institution’s activities, benefiting multiple generations. Micro credit works on the

premise that small loans made to people with little or no collaterals can help sustain

and develop self-employment initiatives. Small loans can help women create a micro-

enterprise and generate a new source of income for her family. Loans to existing

enterprises can sustain employment by providing working capital to buy products or

materials. Credit may also help increase profitability of existing ventures by allowing

for the purchase of more efficient equipment or products at wholesale rather than

retail prices. Micro credit is as much about money as it is about information, with

sustainability and non-dependence on external resources being vital to the growth of

micro credit programs. Micro credit has been particularly useful as a strategy for

women's socio-economic development. By enabling women to gain access to

economic resources and credit, we can help develop leadership capacity in the

community and decision-making power in the home. In addition, women have proven

to be better credit risks than men, paying back loans at a much higher rate. Since

women tend to spend a higher percentage of their income on the household than men,

lending to women can result in more significant impacts on children's health,

education and general well-being. Global experience with micro lending demonstrates

that women are better credit risks than men, and that poor entrepreneurs have higher

repayment rates than large bank clients.

4.2 How does micro credit empower women? Microfinance empowers women not

only economically but also socially and within the family. Simply earning a small

amount of money, through access to capital to start a small business, can increase

women's confidence and empower them through greater economic independence and

security. This in turn gives them a chance to contribute financially to their household

and community. The success of Shri Mahila Griha Udyog (Lijjat) (Shri Mahila Griha

Udyog, is located in Mumbai, India and has 67 Branches and 35 Divisions in different

states all over India. They have a wide range of food products manufactured by

women) which has offered self-employment opportunities to women at all its 61

branches can be replicated. Any woman looking for work can approach any of Lijjat’s

branches and join the 40,000 plus strong team of Lijjat and earn INR 2,000 to INR

3,000 every month. This is a perfect business model which has gained strength with

the growing numbers. The company has grown into a corporate with an annual

turnover of more than INR 3 billion. Hindustan Unilever Limited (HLL) selected

woman entrepreneurs Shakti Amma (It is a micro-enterprise scheme with a difference,

aimed at underprivileged rural women. It has been set up by Hindustan Unilever Ltd

in partnership with a number of development NGOs, microfinance institutions and

government agencies) and equipped them with education and access to products.

These women have not only earned earning capacities but have also become educators

and facilitators. They have knowledge about the requirements of the villagers and the

products as well. She is the salesperson, advisor and the supplier to the village.

Microfinance can help women to escape from domestic violence by giving them the

economic resources necessary to escape from violent situations. A recent study found

that women who are members of microfinance organizations suffer from less violence

than those who are not. More specifically, the Working Women's Forum found that

41% of its members who had suffered domestic violence were able to stop it due to

personal empowerment, and 29% were able to stop it through group action. (Source:

UNDP, 1995 Human Development Report (New York, UNDP, 1996)

The Women's Empowerment Project in Nepal has shown that 68% of its clients

increased their decision making power as regards family planning, buying and selling

of property, children's marriage, and sending their daughters to school. The World

Education Fund has shown that access to microfinance empowers women to negotiate

more equitable access to food, education, and health care for their daughters. (Source:


Noble Prize winning economist Amartya Sen has pointed out that there are around

100 million missing women (women and female children who died prematurely), due

to the fact that women and girls often receive inferior access to basic health care and


Women's financial contribution to family income earns them more respect from their

husbands, children, in-laws, and extend families. It has been observed that women in

Self Help Groups working with ICICI Bank work with dignity as they decide which

borrowers and projects will receive loans. The involvement of women in finance and

bank operations has given them a new sense of achievement. Several studies have

demonstrated that women in microfinance groups play a greater role in community

service by organizing for social change, by participating in the community meetings

and also by contributing financially for the community projects.

4.3 Responding to the needs of women. The delivery systems of the financial services

to women need to respond to the calls of the low income women and their business.

The low income women entrepreneurs are less mobile than the men. Hence it is

important that lending services be available where the women are. These

entrepreneurs have small shares of physical and financial assets and as such cannot

give traditional collaterals. Many women in developing countries are illiterate. While

illiteracy usually does not hinder the success of a woman's micro business, illiteracy

does create barriers in meeting normal bank loan requirements. Poor women

entrepreneurs often lack the confidence; as such the confidence building activities are

important for them.

The women entrepreneurs face a lot of cultural and legal barriers especially with

respect to the property rights. Self employed women, who are economically weak,

tend to concentrate in goods and services requiring low skill base. They work on

goods which require traditional skill sets which are family based operations. Though

the capacity to bear financial risk is low, they have a tremendous capacity for hard

work, a spirit of endurance and enthusiasm, and an openness to learn and improve

their economic conditions.

Women have access to the financial services and they tend to take advantage of the

same to gear their business. However, a specific targeting and a women only approach

are essential in certain settings.

4.4 Financing Difficulties. Credit is available for women through multiple schemes

but there are still bottlenecks and gaps. The multiplicity of schemes is not adequately

listed nor is there networking among agencies. As such, clients approaching one

institution are not made aware of the best option for their requirements. The need of

the hour is to facilitate a closely integrated data bank into which all concerned

agencies are plugged in. The Karnataka Women's Corporation has set up a resource

centre, which apart from acting as a data bank, also provides counseling and prepares

research and evaluation studies. Group financing is also being extended through banks

and being implemented mainly through Mahila Samajas (Women’s Co-operative

Societies in India) of the Karnataka Women's Development Corporation. There is a

justified demand for a waiver or reduction of collateral for women entrepreneurs. A

system of exemption of collateral will help a large number of women entrepreneurs to

take advantage of the credit facilities.

4.5 Backing Women Micro entrepreneurs. Women make tremendous contribution to

the economic development of the country, and therefore the women’s perspectives

should be included in designing and implementing the economic and social policies.

This can be achieved by including their participation in the policies.

Micro finance has contributed a great deal towards empowerment of women.

However this momentum has to be maintained. The empowerment cannot be a single

cycle process. Micro women entrepreneurs require a defined set of service needs as

today’s micro enterprises are tomorrow’s small firms and should be given an

opportunity to grow. Sustainable financial services for micro enterprises must be

designed and put in place. Experience indicates that growth oriented micro and small

enterprises need timely access for working capital and fixed investments. The self

employed women producers must have access to timely credit, savings and insurance

services. The women require assistance in the form of technical services on

productivity management and quality control. The micro entrepreneurs need to be

equipped to deal with complexity in their businesses, specialization in management

functions, technological advancements and improvised marketing channels. It is

essential that the micro entrepreneurs be allowed the space to change their objectives

as their experience and confidence grow. Services should be flexible enough to evolve

with the firms' dynamic shape as they move from survival to growth patterns. The

objective is to put at the disposal of the SMEs the different elements needed to grow

and modernize, so that they can use these services according to their entrepreneurial

attitude. It is also important that non-credit business services are also available on a

voluntary basis.

4.6 Shifting Paradigms. Historically, women have contributed substantially to the

social and economic development of the country. They have handled different

situations with strength and unity. There has been a marked shift in thinking both at

the level of policy for women and also the level of implementation of policies for

women. Micro finance, an important strategy which emerged in the nineties for

poverty alleviation and empowerment has been extremely relevant for women. The

Microfinance Movement has created a vision of increasing numbers of women

borrowers who have successfully established a model of economic self reliance

leading to social change.

The Self Employed Women’s Association Movement (SEWA) (an organization of

poor, self-employed women workers. SEWA has a membership of nearly 700,000

members all of whom are women in the informal economy in all rural and urban

sectors of work. Source: www.sewa.org) is a living example to illustrate this point.

Leadership of women with different skills and occupations has blossomed because of

SEWAs integrated approach. The women have become the leaders of their own

regional development programs. These movements have helped women to tread on

large scales and they are ready to defeat corruption and get results.

Women today have more alternatives, have become more self reliant and have

multiple options to choose with respect to the direction they want their organization to

take. There is now mounting hope that micro credit can be the most effective poverty

alleviation tool. The understanding is that micro credit can help the poor reach their

dreams of equal opportunities; however, it is not a magic wand. Every tool needs to

be utilized in the right manner and method. The same reasoning applies to micro

credit. In India, micro credit has worked largely through self-help groups. The groups

are dominated by women, have simple rules - save, accumulate and give loans to each

other. Globally, it is proving to be one of the most effective strategies to reduce

poverty. Micro credit lending institutions are currently estimated to reach some two

million households in India.

(Source: www.indiatogether.org/2005/nov/eco-microfin.htm)

Banks have recognized the potential in rural banking and are now willing to lend to

the poor. They are looking to tap the expertise of micro credit groups to create a new

market. Banks have neglected this sector for so long and today they lack the capacity

to service the small lenders. V.K. Chopra, Chairman and Managing Director,

Corporation Bank, admits, "Lending without any collateral for commercial banks to

the poorest of the poor is very difficult as banks do not have the expertise or facilities

in these areas. That is why micro finance institutions should step in. Today's banks are

       flush with money. If micro finance institutions are strong, banks will readily lend to


       (Source: www.indiatogether.org/2005/nov/eco-microfin.htm)

       Banks like ICICI have increased their rural financing targets and are ready with their

       task forces to take up the micro finance revolution. Nachiket Mor, Executive Director,

       ICICI says: "A lot has been done in Andhra Pradesh, but we want to build 250 micro

       finance institutions to build a network in 600 other districts each one serving a million

       households. It will involve around INR 2 trillion and it is not an unreasonable dream."

       Mor feels that the micro credit movement must now move beyond their members and

       look at financing for roads and water.

       (Source: www.indiatogether.org/2005/nov/eco-microfin.htm)

       Today a large number of banks are also seeking help from the micro credit

       institutions. The banks need to understand the requirements of the small borrower,

       their constraints, their culture, and their dreams. Micro financing is a totally new

       experience for them and they need to reach there fast!

5. Research methods

The fieldwork started on December 10, 2007 and ended on March 28, 2008. Fieldwork here

includes the time spent writing the research proposal, and also visiting a lot of Micro Finance

Institutions( specially banks ) and also The Association of Women Entrepreneurs Of

Karnataka (AWAKE) (Association of Women Entrepreneurs of Karnataka is one of the few

non-government organizations committed to the cause of women empowerment). The entire

study was conducted in Bangalore. Fieldwork started by data collection which employed the

following tools of investigation: available literature, case-study research, participant

observation and in-depth interviews. All tools of investigation fall within the realm of

qualitative research methods employed in social sciences. Qualitative research methods use

coding and analyzing to convert qualitative data into measurable concepts in social science.

The case- studies sample was chosen randomly, at Srimatha Mahila Sahakari Bank

Niyamitha (Srimatha Mahila Sahakari Bank Niyamitha is a Women’s Co-operative Bank in

Bangalore, founded on 30th November 2000).

       5.1 Rationale for the qualitative study. Micro credit is a social science, and there is a

       need to study the nature of the problem as well as the extent. There are different

       dimensions attached to the concept of micro credit, as the circumstances and the

       environment associated with the borrowers also need to be studied. Qualitative

       methodology helps us to understand the various facets of the micro credit and women

       entrepreneurs, and to obtain a deeper understanding of this social issue. The financing

       of business can be linked to their back grounds and the business gets influenced by

       the circumstances and the environment in which the borrowers sustain their lives and


       5.2 Employing Qualitative Research Methodology. The Small and Medium

       Enterprises research is at too young a stage in its development to benefit from a

       positivist research approach that encourages the use of quantitative methods of

       scientific enquiry (Aldrich, 1992; Bygrave, 1989; Churchill and Lewis, 1986; Sexton,

       1986). Consequently, a review of recent small firm literature reveals researchers’

       emerging preferences for phenomenal approaches to small firm studies that employ

       qualitative methods of collecting rich data about small firms (Holiday, 1992).

       This is also an effort to look at in detail the various facets to the issue of accessibility

       of micro credit to the women entrepreneurs. The facets are borrower’s experiences

       revolving around obtaining credit, the family background, the lenders assessment of

the borrower’s case and the interplay that transpire around the transaction. The

borrower’s experiences were captured by observing the women entrepreneurs in the

most natural situation at their internal meetings amongst themselves. The meetings

were conducted in informal settings at the premise of AWAKE and also at Srimatha

Mahila Sahakari Bank Niyamitha. These observations brought to light several factors

- not only the factors that directly influence the credit situation for the women

entrepreneurs, but most importantly also the indirect influencers that affect the credit

situation for women – which were observed during the course of their conversation.

Following these initial observations, the author collected a diverse sample of 10 – 15

women to be able to acquire an in-depth understanding of the individual

circumstances and challenges they have faced in their process of acquiring credit and

how they have addressed these challenges in their own way that is, the options /

alternatives they have explored. The awareness levels of micro credit finance, as a

financing option, amongst these entrepreneurs and their perceptions about this source

of credit were also explored. This helped the author to assess their willingness

towards considering the micro-finance route and the barriers that come in the way of

it. To acquire a holistic understanding of the issue, it was important to focus on

understanding perspectives of the other stakeholder that is, the creditor (Banker). This

was done via in-depth interviews that were conducted with the Bankers and this

helped the author to get information on the how they assess a particular creditor’s

case, whether there are any specific guidelines/procedures used to assess the case of

women entrepreneurs in particular. It also helped the author to get first hand

information on the process that an entrepreneur encounters while approaching a bank

for Credit. This was supplemented with documental evidence that is, the appraisal

forms that were used by banks while deciding on the credit worthiness of borrowers.

The most interesting aspect of the entire study was the counseling sessions conducted

at the bank every Thursday from 3.30p.m to 7p.m (IST). This bank made every effort

to counsel their prospective customer/borrower before she actually applied for the

loan. This was done in order to orient the borrower and also test the repayment

capabilities of the borrowers. The most important aspect of the entire study at the

bank was the counseling sessions conducted by the director of the bank, Mrs. Padma

Seshadri. The third and the last aspect of this issue was the actual transaction process

that transpired when the borrower approached the bank and the dynamics at work.

This involved understanding the comfort level of the woman entrepreneur or the lack

of it when approaching a bank, how they felt in that environment, the challenges they

faced, the information available or information gaps, the levels of officials that a

woman needs to interact with before she reaches her final point of contact, the

processing, waiting time involved and finally the actual conversation that transpired

between the banker and the women seeking credit. These factors are subtle,

sometimes even routine and therefore there was likelihood that while conversing with

women, they would not be able to recall the small details in retrospect about how they

felt when approaching a bank for credit. Though these factors are nevertheless an

important part of the entire process and bear an influence on whether the woman

ultimately gets credit or not. Therefore the author also observed these aspects by

accompanying creditors on their visits to the bank to get a first hand account of their

interaction process that brought to the fore some of the subtle nuances that got missed

out during the interviews. This also helped to capture the non verbal cues that would

signal a woman’s comfort level in a bank environment in her process of trying to get


5.3 Participatory observation. An important argument against real-life investigations

is made by Plott (1982), who suggests that findings from simulations are free of

complicating factors present in the real world. This noise would tend to mask

occurring social phenomena. Therefore, carrying out the research in a simulated

environment could facilitate the identification of the most important issues that

characterize the development of a shared meaning. A further argument against real-

life research is that much data on decision making relies on memory. Even when a

researcher is continually present in the organization, he or she is not personally

present every moment managers are talking or reasoning. Some data is gathered from

what managers’ report later on. Field research, on the contrary, takes place in settings

that are existentially real for the participants. The field researcher is interested in

understanding and describing the social and cultural scene in its complexity (Denzin

and Lincoln, 1998). McGrath (1982) argues that field studies have a high degree of

realism as they are conducted in a real-life setting.

5.4 In-depth Interviews. In-depth interviews with the target segment (as opposed to

conducting a group discussion) have been chosen as the method of enquiry due to the

following advantages.

•   Singular viewpoints from a respondent without influence from others

•   The ability to follow a track or theme with one respondent from start to finish

    (e.g., from initial decision to current satisfaction levels) – which is particularly

    relevant while studying this problem since it would help understanding how the

    person’s experience of getting credit is affected by the indirect factors relating to

    her background.

•   Flexible structure – can quickly modify or expand discussion topics as learning


•   Can probe specific issues

•   Opportunity to discuss personal or intimate topics in confidence

Also, it would help in exploring the experiences of different segments exclusively

(that is, first time borrowers v/s second time borrowers) – where as in a group

discussion it would be difficult to isolate the responses / experiences of participants

from the 2 segments.

5.5 Sample Design. For the purpose of this study, the segment of Women

Entrepreneurs is important due to the strong inter-linkages between the needs of this

segment and the way micro credit as a financing option is structured. Even though it

has been known / proven that women are associated with relatively higher credit

worthiness where it comes utilization of funds for the intended purpose, the

willingness and propensity to pay back etc, as a segment they have not been

recognized enough for their ability to run successful businesses which works against

their ability to raise funds from other traditional sources. Micro credit with lesser

formalities relating to documentation, shorter processing time, and fewer

requirements for collaterals lends itself aptly to the needs of this segment.

Also, women entrepreneurs as a segment are affected by indirect factors (education,

exposure, collateral rights) that impinge on their credit borrowing capacity, by virtue

of being women. Thus studying the needs of this segment would not only help us

understand and appreciate the specific circumstances relevant to them and how micro

credit finance companies could address their specific needs, but also would help

understand the needs and experiences of entrepreneurs in general. Although micro

credit as a financing route has seen success with specific women groups either in rural

areas or women involved with micro businesses (SEWA, Shakti Amma), as a

financing option available to SMEs, it has not made a very big dent. Understanding

first hand experiences from women entrepreneurs would help unearth some of the

reasons why this route has not had far reaching effects yet and what are the steps to be

taken to address this situation. It would also help in unearthing ways in which the

success of the micro businesses / individual women with micro credit can be

replicated to a broader audience / to larger scaled businesses.

5.5.1 Women in Bangalore. Data on the numbers: Bangalore women entrepreneurs –

are representative of the women entrepreneur segment in India. Bangalore is not an

atypical geography with respect to literacy & affluence.

5.5.2 Sample strength. Amongst the broad segment of Women entrepreneurs, there

are 3 specific segments that would be relevant from the point of view of micro credit

as a financing option.

       a) Potential Start Ups – those would be approaching banks and other credit

       agencies for the first time. Number of interactions conducted: two. Method

       adopted: Accompanied Observations

       b) Start Up Business – those who have been involved with setting up their

       business and have approached credit agencies in the recent past that is, last 1

       year. Number of interactions conducted: five. Method adopted: In-depth

       Interviews and Participant Observation.

       c) Established Business – who is approaching credit agencies for re-finance or

       working capital needs. Number of interactions conducted: five. Method

       adopted: In-depth Interviews and Participant Observation.

       Apart from interviews with borrowers, as mentioned earlier, the author also

       interviewed Bank Managers. To ensure reliability of research method, the obtained

       data was checked for consistency, and cross examined between both primary and

       secondary sources. By primary sources, the author refers to Srimatha Mahila Sahakari

       Bank Niyamitha’s actors and by secondary the beneficiaries. To ensure validity many

       resources from different disciplines and perspectives on the issues of empowerment

       and micro credit organizations were used.

       5.6 Limitation of the method. Limitations of the research method used are as follows:

       The key informant was Srimatha Mahila Sahakari Bank Niyamitha itself and their

       field workers. This constitutes one-sided source of information. Another limitation is

       choosing the sample for one area, for convenience purposes, hence the sample is not

       representative of all beneficiaries just those residing in Bangalore. This results with

       the inability to generalize the research findings. Finally the time constraint was a

       major factor as the research proposal was to be completed in the course of three


6. Real People – Success Stories

Women empowerment has a lot to do with financial capability, based on the pretext that if a

woman is generating an independent income she will be able to take decisions without

depending on her spouse. Empowerment also entails providing the opportunity of assisting

the family.

       6.1 Story 1. One of the interviewees, Asha Shetty had nurtured a desire – to begin an

       enterprise of her own. Asha hails from Udipi and has a zest for new things and is

       extremely adaptable to the changing business environment around her. With guidance

       and support from AWAKE, Asha set up a unit at home to manufacture hand made

papers and produce gift bags, hand bags and carry bags made out of the manufactured

hand paper. For buying the colour dyes and moulds required for this work, in addition

to her own savings, she took a loan of INR 25,000 from Srimatha Mahila Sahakari

Bank Niyamitha. Once the enterprise began in a full fledged way, marketing posed a

very big problem. Asha accepted this challenge and personally took up the task of

selling the items. After some time, she was able to make her business into a profitable

venture. Asha was also able to get trained in screen printing and has been trying out

on these bags to make them look more attractive. With the expansion of her business

she has been able to create employment for about 15 women. These women take

home all the necessary material like paper, thread and gum, get the covers ready in

their houses and bring it along with them the next day. According to Asha, there is a

profit of 15% - 20% in this business.

Asha Shetty, House wife, Manufacturer – Hand made paper

Income in the year 2001 – INR 10000 per month

Income in the year 2002 – INR 15000 per month

Income in the year 2003 – INR 20000 per month

Income in the year 2007 – INR 25000 per month

In such a case, it could be noted that the women may end up with two jobs: that of

keeping the house, and selling goods from home.

6.2 Story 2. Manjula Mishra began Akhil Herbals in 1994 with INR 2500 loan from a

friend. She started her business at a point in her life when everything seemed to be

going wrong. Coming from a history of cruel employers, Manjula decided that she

was fed up with having to depend on others to compensate her for her hard work. She

decided to set up her own business. Today Akhil Herbals is worth INR 0.2 million. In

1981 when Manjula’s husband lost his job, she decided to support her family by

stitching and hemming clothes. She faced a lot of emotional and financial battles and

thereby decided to begin her own business with INR 2500. She learnt ayurvedic

beauty treatment from her family. In her case the ayurvedic beauty treatment and

packs was an old family tradition and business. She manufactured skin powders, face

packs and hair packs. Initially, she sold her goods door to door and later opened her

store with a bank loan of INR 15000. Manjula became an AWAKE member and

networked with other entrepreneurs with whom she shared exhibition stalls. Manjula

takes a lot of pride in the purity of her product, and now houses a variety of her own

products as well as those of other companies throughout India. She espouses the value

of hard work, citing that though her husband had multiple educational degrees and she

herself signs her name with a thumb print, she has been the driving force behind the

family’s survival. Today Manjula earns around INR 5000 per month and supports her

family. She is prompt in paying her loans and even finds time to do some voluntary


Manjula Mishra, House wife, Manufacturer – Herbal Beauty Products

Income in the year 1980 – NIL

Income in the year 1999 – INR 2500 per month

Income in the year 2001 – INR 3000 per month

Income in the year 2007 – INR 5000 per month

6.3 Conclusion from the above case stories. Micro credit has been successful in

presenting working women with opportunities of becoming active members of

society, and proving their independence. Women are becoming empowered by

supporting the family financially, and are able to take decisions without referring to

their spouses, brothers, or fathers. The author has inferred from her observations and

interviews that the most of these business models rely heavily on networking and

      word of mouth to expand their clientele. Today, the woman is actually able to tell the

      banker that she is taking the loan to support her husband and not herself. This does

      not constitute a problem, as long as she pays her dues on time. By cross examining the

      findings one may note that empowerment is a very complex concept, but to apply

      George Kents’ definition of being able to define, analyze, and act on your own

      problems independently one can notice that women entrepreneurship has come of age.

      The micro credit program may be enriching women, widening their scopes, and

      providing an opportunity to become independent, but this is hindered by social

      constraints, family structures, prevalent norms and values, and governmental, social

      and economic policies. However, micro credit programs targeting women remain a

      step forward in the path of self dependency; it is social norms and misconceptions that

      need to be challenged. Vital components for the success of empowering women

      through the provision of financial assistance should consider advocacy, policy reform,

      training programs, governmental support in terms of health security services,

      meaningful and sustainable increase in income levels, and an enhanced understanding

      of household interrelationships and social constraints.

7. Major Findings

      7.1 Micro credit, poverty reduction and empowerment. The study shows that the

      flow of micro credit is a pushing factor for the promotion of micro enterprises. This is

      evidenced by the fact that the women Self Help Groups (SHGs) are the purveyors of

      major credit requirements of new micro entrepreneurs and also the existing micro

      entrepreneurs. Majority of the micro entrepreneurs lacked necessary skills in the

      chosen trade/activity. This is evidenced by the fact that some of the micro

      entrepreneurs have shifted their operational activity due to lack of necessary skills.

Most of them started from the cadre of daily wage labour to become small business

entrepreneurs. Majority of the entrepreneurs operated with narrow margins and their

enterprises have low entry and exit barriers. The study also reveals that Women SHGs

are still in the process of consolidation and their sustainable development depends on

a number of factors, which are both internal and external to the organization.

       • Leadership must be emerged from the grassroots level.

       • Majority of women though illiterate and unskilled (with no specific

       occupational skills) can be transformed.

       • There is a gradual increase in production credit when compared to

       consumption credit in the study area.

       • The purpose for credit demand and its utilization is more in consumption

       loans, which is showing a decreasing trend over a period of time.

       • Majority of the individual women micro-entrepreneurs in the study areas

       belong to younger age group and were self- starters in their business/trade.

       • Most of the entrepreneurs in the study area in respect of occupational

       category prefer miscellaneous (other) activities and this trend indicates that

       they are unskilled and have no intention to take risk into standard business or

       product lines.

       • Although the women groups have been built into well-knit social groups,

       they have received very little help from any professional agencies in the

       matters relating to the identification of viable self-employment


       • Active intervention by district administration, professional bodies and

       voluntary organizations is a precondition for the successful conception of

       micro-enterprises especially in areas of skill training, designing products,

       providing new technology and access to market.

7.2 The main benefits of micro credit appear to be.

Reduced vulnerability of the poor to adverse circumstances

Increased consumption in the same group

Empowerment of women (Source:http://www.unitus.com/wwd_borrowerprofs.asp).

The major spin-off of the micro credit movement at the grassroots level has been the

fact that, women have used this system to come out and join a mainstream activity. In

many areas women have gained a voice and been able to use this space to come out of

their traditional roles into a more proactive male space. In many instances, gender and

caste subordination has been questioned. Women have been able to mobilize capital,

and in the process have acquired skills that have enhanced their economic, social and

political power. This positive growth has usually been where the women have

facilitated training and capacity-building with additional inputs. However, despite the

spread of micro credit programs and their growing popularity with policymakers, hard

data is somewhat lacking. There is little standardization across studies as to how to

define critical processes and measures of success. The definition of poverty, and

especially reduction in poverty, tends to vary from study to study. Women’s

empowerment is another very nebulous term. Many terms and processes are redefined

on an ad hoc basis each time a new study is conducted. Much of the literature on the

subject of micro credit appears to be at the stage of observation and anecdotal


One of the fundamental problems with micro credit programs is the difficulty in

actually turning a profit on the loans. In the first place, borrowers must bear not just

the cost of the loan and interest payments; they must also invest a significant part of

their time in getting trained on the skill sets. The loans usually finance some type

of traditional women’s work (such as papad-making or weaving and sewing) which is

not seen as fit for men to do. This leads women to rely on their female children for

supplemental labour, and thus female children are under increased pressure to stay out

of school so that they can help contribute to the family income. Studies have found

that women value wage employment over credit because of stability and a collective

workspace which provides information and solidarity. The status and material benefits

of income wage employment are more likely to promote economic and social

empowerment as women have a greater degree of control over the money they earn in

employment. (Source:http://www.prospect.org/print/V14/5/polakow-suransky-s.html)

Another problem is the capture of the loans by male relatives. In some cases, male

relatives use female borrowers as fronts to get relatively low interest loans. These

loans may or may not be used to benefit the family, and the female borrowers rarely

see any benefit at all. And yet, the women are still held responsible for repayment of

the loans. Women also need have more access and control at the local market place.


As micro credit programs become more successful and hand out more loans; more

people enter the local marketplace as micro-entrepreneurs. Nan Dawkins Scully of the

Women's Micro credit Accountability Network (WOMAN) writes that the cumulative

effect of rising costs, declining demand, and competition from both cheap imports and

increased entrants into the sector leads to shrinking profits in informal-sector trade. In

other words, the initial success of micro-enterprises can lead to subsequent over

       competition problems, especially when international trade liberalization is factored

       into the equation. (Source:http://www.ieo.org/kav001.html).

       7.3 Possible research questions. This research proposal may be followed up with

       other research questions that would be interesting to examine. The questions were

       chosen based on the fieldwork, specifically the interviews.

          •   Defining households and the power structures within it

          •   Why group loans/group lending is not successful with males

          •   Defining poverty and women empowerment


Special thanks for encouragement and support to Mrs. Padma Seshadri, Promoter and

Director of Srimatha Mahila Sahakari Bank Niyamitha and Mrs. Rajeshwari, Head - Research

and Resource Centre, AWAKE.


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