Empowerment of Women through Microcredit -

Concepts and Case Studies

Aparna Krishnan

Roadmap The microcredit concept Empowerment of women through microcredit Grameen Bank – A well-known example

Origins How it works

Kudumbasree – Focus on an effort closer to home How it works Analysis & suggestions for improvement

Empowering Women through Microcredit - Concept

The Microcredit Concept One form of microfinance, along with microinsurance, microsavings etc. Extension of microloans to poor people viewed as not bankable

No collateral, steady employment, credit history or education Helps poor people engage in self-employment & generate income Allows poor people to help themselves through self-help groups Why care about microcredit?

Originated in developing countries and shown to work• Repayment rate is often higher than with traditional banking

Goals go beyond those of traditional banking• Helps raise living standards, enhance the status of women

Better than handing out charity• Gives the poor a say in their own destinies, and returns self-confidence• Provides greater incentive to employ the money for generating income• Poor countries are no longer prisoners of foreign aid

Advances socio-economic development, democracy and human rights UN declared 2005 as International Year of Microcredit

Case Study-1: Grameen Bank

Origins Founded by Dr. Mohammed Yunus in

1976 in Jobra village in Bangladesh Began with lending $27 to 42 families

Were forced to borrow under oppressive terms (dadan system)

Considered non-creditworthy by traditional banks

$300 capital secured from Janata Bank with Dr. Yunus as guarantor

Why Lend to Women?97% of Grameen Bank’s borrowers are women

Benefits reach the family more directly Dr. Yunus: “When a destitute mother starts making some income, her dreams invariably

center around her children ” Women are often the worst affected by poverty – they are left totally insecure and

have few opportunities Have more at stake, and given the smallest opportunity are willing to work extra hard Adapt quicker to self-help groups

Boosts self-confidence of women Gender equality key to socio-economic development Higher repayment rates than loans to men

Challenges with lending to women Hard to reach women overcoming societal barriers like purdah system Handle conflict within the family when the woman is designated to hold purse-strings Support system to help women

How Grameen Bank Works - I

Grameen Bank5 member groups

Centers made of upto 8 groups

Group fund for emergencies

Repayment•One year loans•Equal weekly installments•Repayment starts 1 week after loan

•No offices

•Trained women bank workers who live with the poor

•90% owned by borrowers

•Organizes workshops

•Established Sixteen Decisions as guidelines to give meaning to lives of borrowers

•Grameen is not just a lender – Sixteen Decisions make it a close partner in improving the living standards of the poor

•Relationship built on trust - 99% repayment rate

Analysis of GrameenAchievements 99% repayment rate Improved status of

oppressed women in Bangladesh

Helped in economic development of small villages

Reached out idea of microcredit to other countries as well. E.g.: Kashf in Pakistan

Issues / Continuing problems

Changing the mind-set of people in villages

High interest rates for microloans.

Ineffective measures to tackle problems of interest rate. E.g.: rate ceiling

Case Study-2: Kudumbashree

KUDUMBASHREE- Quick Facts

A multifaceted women based poverty reduction programme

Jointly initiated by Government of Kerala and NABARD.

Scaled up from two UNICEF assisted initiatives in Alappuzha Municipality (UBSP) and Malappuram district (CBNP)

Implemented by Community Based Organizations(CBOs) of Poor women in co-operation with LSG Institutions

How Kudumbashree Works- II Identification of beneficiaries Pooling like-minded individuals into self-

help groups, thus giving it a community based organization (CBO) Neighborhood groups (NHG) - One woman each

from 15 – 40 families at risk

Area Development Society (ADS)- Federation of all NHGs in a ward

Community Development Society (CDS)- The Apex body at the Local Body Level

NHG

NHG

ADS

ADS

CDS

How Kudumbashree Works (cont’d) Initially, groups collect money for use by needy

member and maintain finances. This process assessed by bank. Bank account created for future loans and

savings. (Microloans) Repayment within stipulated time Special vocational training administered. Microenterprise set up Development: Gender empowerment, improved

standard of living

Group action to access services, resources and against social evils

Micro-enterprisesMicro-enterprises

Resource assessment-prioritization of needs-Implementation of action plan

Problem Identification, need Assessment-Micro-plan

Day-to-day management and financial management

Collection of Thrift, Micro Credit & Repayment monitoring

Regular weekly meetings and sharing of information

Women Empowerment

Stairway to success

Some initiatives undertaken by Kudumbashree

Health enterprise: Santhwanam Lease land farming: Harithashree Microhousing: Bhavanashree Microenterprises- Garment manufacture,

solid waste management, mosquito eradication

Destitute rehabilitation: Ashraya

Analysis of KudumbashreeAchievements Successfully reached out

to many women living below the poverty line

Initiated and carried out numerous developmental projects in different areas

Reduced the gap between rich and the poor by improving the latter’s economic status

Issues / Continuing problems

Complicated organizational system leading to rift between higher authorities and groups at grassroots level

Longer repayment period might lead to psychological tendency to hold on to money for longer

Comparing and Contrasting Grameen Bank & Kudumbashree

Grameen Bank

Only basic organisation into groups of 5

More bank-customer interaction

No vocational training provided

Short repayment period

High interest rate

Kudumbashree

3-tier community based organization

Bank interaction more at higher level of organization

Vocational training provided for set up of micro enterprise

Relatively longer repayment period

Relatively lower interest rate