It is widely recognized that the path to equality for women in India remains a long and winding one even today. In rural India, women have significantly lower literacy rates with a minimum of 50.6% compared to a minimum of 74.1% for men in the same areas and they make up a mere 19.9% of India's total labor force. Because of these factors, women are extremely reliant on their husbands for income and are rarely the decision-makers in the family. Empowering women to be more self-sufficient is extremely important for numerous reasons including utilizing their untapped potential in contributing to the economy. Microfinancing is one key way to do this is by giving women all the means necessary to be economically self-reliant.
What are Microloans?
Microfinance is a way credit, loans, insurance, and more are provided to the underserved in rural parts of India. There are three parts to this initiative;
Microloans
Micro savings
Microinsurance
The poor, those around or below the poverty line, usually have little to no assets or credit history and are naturally deemed high-risk for typical loans from banks. Microloans provide an alternate solution. They are given to borrowers with no collateral (security to ensure the repayment of a loan) and are distributed in small quantities and with high interest rates. And in many cases, recipients of microloans from certain organizations are expected to take courses to train them to make better use of their money.
How are they distributed?
There are many ways microloans are distributed. One of which is through Self Help Groups (SHGs). These are small groups, funded or supported by banks or non-government organizations, of around eight to fifteen women, who pool their savings into a group account that is then used to fund microloans. Some benefits of SHGs include;
Allowing women to build their savings
Giving them greater access to credit
Helping them learn important skills such as financial literacy
SHGs also serve as community platforms from which women can become more active in local affairs, by running in village elections for example.
Being part of a larger group has also shown to increase chances of success
Microloans are also distributed from larger institutions such as banks or non-government organizations, called Microfinance Institutions that usually are specific to a certain demographic. Examples of such institutions catered to helping women in rural India are;
The Benefits of Microloans
Firstly, to the underserved, microloans are much more useful than regular loans for the following reasons;
Their accessibility to those without previous credit history makes them more attractive to the poor than regular loans
In addition, it is easy for the poor to get trapped in a vicious cycle of debt with regular loans but the support provided as well at the small amount of money distributed in microloans helps reduce the chances of that happening with microloans
Here are some socio-economic benefits of microloans;
They have shown to significantly help bring families out of poverty
They give women the opportunity to be the decision-maker or have a greater voice in the household by being economically self-reliant
The training often provided by microfinance institutions instills a perception of strength and confidence in women by giving them the skills necessary to succeed in the future
It encourages women to contribute to the economy
To conclude,
Microloans are integral to the empowerment of women in India by giving them the skills and support needed to the economically self-reliant.
This has broader effects of helping alleviate families out of poverty.
Self-Help Groups and Microfinance Institutions are two ways they are distributed to women.
Often, training or mentoring is important skills such as entrepreneurship and more are provided by the organizations along with the loans and they directly fuel the long-term development of the women who benefited from them.
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