Micro credit for Women Micro Entrepreneurs
Madhavi A Lokhande
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: firstname.lastname@example.org
Email 2: email@example.com
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.
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
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.
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
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.
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
• 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
• 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
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
• 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
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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