Microcredit, Poverty, and Empowerment: Exploring the Connections

Abstract

In recent years microcredit has grown rapidly based on its promise to alleviate poverty and empower women. However, as the microcredit industry has grown, the initial emphasis on poverty alleviation and empowerment has changed; some critics argue that the industry now looks like commercial finance. This article explores these criticisms by comparing two microcredit programs in Chennai, India. Both programs work with the same population but take different approaches to credit delivery. Drawing from the participants' testimonies, the findings suggest that in general, the loans do not permanently move participants out of poverty; however, they do reduce some of the vulnerabilities associated with poverty.

Empowerment of Women and Poverty Reduction in Developing Countries

“…In addition, Islam et al (2008) illustrated that the percentage living below the poverty line was lower than the national average which means that there was a reduction of poverty amongst the study group because they joined Rangpur Dinajpur Rural Service. These data show that the participation of women in this program improved their economic standing and sustainability just as Sindhe et al (2013) and Shetty (2010) had argued above. Salt (2010) concluded that women found the microcredit program helpful and recommended it to others.…”

“…They found these effects to be generally negative, suggesting microfinance as a possible mitigating factor. Although all these studies discuss microcredit or microfinance programs, Shetty (2010) is the only one that specifically treated the relationship between microcredit programs and women empowerment. While Salt (2010) and Islam et al (2008) focused on the impact of microcredit loans on the lives of the women that use them, Sindhe et al (2013) see microfinance as a partial solution to the gender disparity in India, enhancing women's empowerment and reducing poverty.…”

“…This in turn this would create an upward spiral in which they gradually increase their income and their contribution to their family, possibly elevating their standing within their household. Numerically, Shetty (2010) found that 52% of plan recipients in Chennai, India had reported an increase in their level of income due to their access to loans and small grants. In addition, Islam et al (2008) illustrated that the percentage living below the poverty line was lower than the national average which means that there was a reduction of poverty amongst the study group because they joined Rangpur Dinajpur Rural Service.…”

“…Therefore, Salt recommended that these microcredit programs should include educational programs that enhance the health of the participating women and their families. In her findings, Shetty (2010) concluded that the two microcredit programs had a small impact on poverty reduction on the basis of credit alone but that they allowed women to access low-interest loans that they otherwise wouldn't have been able to access. On the contrary, Islam et al (2008) established that in Bangladesh women in the RDRS program tried to improve their economic conditions by using credit in order to diversify their sources of income, which led to a notable improvement in their living standard and an improvement in their livelihood.…”

“Mahkota Untuk Perempuan Di Program Pemberdayaan”: Studi Posisi Penting Perempuan Pada Program Pengentasan Kemiskinan Di Kabupaten Banyumas

“…Peran Penting Modal Sosial Perempuan dalam Program Pengentasan Kemiskinan ibu anggota PNPM Mandiri Perdesaan yang mengalokasikan uangnya untuk konsumtif adalah mereka yang berasal dari golongan tidak mampu atau miskin. Hal ini terjadi karena mereka benar-benar membutuhkan jaring pengaman untuk melangsungkan hidup secara layak, dan PNPM Mandiri Perdesaan telah melakukannya dengan baik.Pemberian kredit kepada kaum miskin bukanlah upaya permanen untuk mengurangi kemiskinan, namun pemberian kredit kepada kaum miskin adalah upaya untuk menghindari kerentanan kaum miskin dari kemiskinan (Shetty, 2010;serta Develtere dan An Huybrechts, 2005). Pinjaman dalam bentuk uang segar tersebut harus dilakukan secara hati-hati, agar pinjaman dari program mikro kredit ini tidak menjadi jebakan atas kemiskinan baru (Gehlich-Shillabeer, 2008: 396).…”