Jun 19, 2024
Introduction
Microfinance is playing a key role in shaping the lives of women across various parts of our country. MFIs have been equipping underprivileged women with access to financial services by implementing customized and accessible schemes and policies. According to a study by the Microfinance Institutions Network(MFINs), more than 60 million Indian women currently hold small, collateral-free loans through microfinance institutions. These loans have helped more than 300 million families in the country to achieve financial independence and lead a stable and healthy lifestyle. This blog demonstrates the role of microfinance in helping women build sustainable businesses. It also discusses various initiatives by MFIs that are helping women establish a stable lifestyle.
Why are microfinance companies targeting women?
Women have been facing significant gender inequalities since the beginning, especially in the financial sector. This is due to many factors such as limited access to education, lack of proper documentation of collaterals, and also due to lack of financial support. According to a study by the International Labour Office Geneva, more than 70% of the world’s poor population are women. This data signifies room for improvement, which is why most of the MFIs are specifically targeting women, leading them to financial independence.
Key Initiatives of Microfinance
MFIs in India have been successful in empowering women entrepreneurs and supporting their businesses by providing microloans or other financial products. Here are some of the key initiatives that have been successful in shaping the future of many women across the country:
- Joint Liability Groups
Most of the MFIs provide collateral-free loans through the JLG model. They typically contain 4-10 individuals and operate on the principle of joint liability, where the members of the group collectively take the responsibility for the repayment. These groups have significantly helped women in achieving economic empowerment by providing loans for establishing businesses.
- Collateral free loans
Collateral-free loans allowed MFIs to reach the underprivileged population of India, especially women. Most of the women lack proper documentation and do not have properties registered under their names. This makes it difficult for women to access financial assistance. MFIs have been targeting women of these kinds, from various parts of the country and enabling financial assistance. As of March 2023, there are a total of 6.64 crore low-income women clients across 729 districts in India who have availed of 12.96 crore active loans through MFIs.
- Self Help Groups
Unlike JLGs, Self Help Groups operate on the principle of savings. These groups typically consist of 10-20 members, who combine deposit amounts into one savings account. The loan disbursement depends on the amount of savings and the lender loan is done in the name of SHG, not the individual. These groups are allowing women from poor backgrounds to have financial assistance to start their own businesses.
- Non Financial services
Apart from traditional banking or financial services, many MFIs have been working closely with women in rural India to offer non-financial services. These institutions have been offering literacy and business training programs to underprivileged women. Educating these women is allowing them to climb up the ladder and understand basic financial literacy. This is enabling women to start new business ventures and attain financial independence.
Conclusion
All in all, microfinance has been shaping the lives of many women across various rural parts of the country by providing them access to financial services. To learn more about how microfinance has helped women establish sustainable businesses in the past, read their success stories on our blog: Women’s Collective Strength: The Role of Joint Liability Groups in Indian Microfinance. SHGs and JLGs have been helping women of India in bridging the gender gaps, fostering financial inclusion, and driving economic growth. These schemes are allowing women to access credit, establish businesses, and improve their livelihood by achieving financial independence.
