The subject of micro-finance is considered as significant and emerging trend in the present scenario for the empowerment of women. Micro finance programmes are promoted as an important strategy for women’s empowerment. Micro finance builds mutual trust and confidence between bankers and rural poor to encourage banking in a segment of population where formal financial institutions usually find difficult to reach. The present paper examines the economic impact of micro finance beneficiaries and whether the economic empowerment has resulted in the generation of a set of self reliant women. The Thiruvananthapuram district of Kerala State was selected for the case study. The survey shows about the positive impact of the development programme of Kudumbashree, a micro financial institution in Kerala, India

DHANYA, M B

SIVAKUMAR, P

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Women empowerment and micro finance
: Case study from Kerala
M B DHANYA and P SIVAKUMAR
University Of Kerala
23. September 2010
Online at http://mpra.ub.uni-muenchen.de/25337/
MPRA Paper No. 25337, posted 26. September 2010 18:03 UTC
Women empowerment and micro finance -
Case study from Kerala 
Dr.Dhanya.M.B1
Dr. Sivakumar P2
1. Dr Dhanya M B, researcher, University of Kerala, Thiruvananthapuram, Kerala, India E mail: 
dhanyambala@gmail.com
2. Dr Sivakumar P, Training Officer cum Asst professor, RGNIYD, Sriperumbudur, Tamil Nadu, India
E mail: babuskumar@gmail.com
Women empowerment and micro finance -
Case study from Kerala
                                                   Dr Dhanya M B
                                                           Dr Sivakumar P
Abstract
The subject of micro-finance is considered as significant and emerging trend in the present 
scenario for the empowerment of women. Micro finance programmes are promoted as an important 
strategy for women’s empowerment.  Micro finance builds mutual trust  and confidence between 
bankers and rural poor to encourage banking in a segment of population where formal financial 
institutions usually find difficult  to  reach.  The present paper examines the  economic impact of 
micro finance beneficiaries and whether the economic empowerment has resulted in the generation 
of a set of self reliant women. The Thiruvananthapuram district of Kerala State was selected for the 
case  study.  The  survey  shows about  the positive  impact  of  the  development  programme  of 
Kudumbashree, a micro financial institution in Kerala, India.
Key words: women empowerment, micro finance, poverty.
JEL:  J16, B26, I13
1. Background
Ever since 1976, when Prof.Mohammed Yunus of Bangladesh began experimenting with 
micro-credit  and  women  Self  Help  Groups(  SHGs),  to  discuss,  share  their  problems,  to  start 
organized  investment  and  hence  an  attempt  to  come  out  from  chronic  poverty  made  a  quiet 
revolution not only in Bangladesh but similarly placed other countries ‘by empowering the poor 
women’. The group-based approach not only enables the poor to accumulate capital  by way of 
small savings but also helps them to get access to formal credit facilities (Shylendra, 1998). For the 
SHG members, the system has been found beneficial because of minimal procedural formalities, 
access to institutional credit without collateral offering, full autonomy in the selection of activity, 
and the availability of thrift for meeting urgent needs. Group lending minimizes transaction cost and 
at the same time the members of a group can avail small loans through that group. In short, if we 
define, SHGs are small informal associations created for the purpose of enabling members to reap 
economic benefit out of joint help, unity, and joint responsibility. The benefits include mobilization 
of savings and credit facilities and pursuit of group enterprise activities.
Recently,  Women  empowerment  has  acquired  a  very  important  place  in  government 
development programmes. Seemingly most of the targeted group programmes of the central and 
state government are using Self Help Group as an instrument for effectively implementing and to 
make the benefit of trickling down to it’s destitute. In Kerala, right from the mid eighties of the past 
century, micro finance has become a key strategy for poverty alleviation and empowerment. In a 
sense this is blindly accepted as an effective instrument for the government schemes and solution 
for women empowerment. In Kerala, the catalyst behind this venture is the government machinery 
under the state poverty eradication mission called  Kudumbasree. A large number of studies have 
analyzed the many facets and issues of micro credit groups under varying levels and themes of 
focus. Women empowerment in pre and post joining of the group attracted much scholarly analysis. 
Most of them use simple quantitative exercises to find out whether the empowerment indicators 
have succeeded in achieving the target with a push from enhanced capabilities, while this analysis 
have its own limitations, which will be revealed in further exploration.
Generally the literature basically focused on some of the aspects like empowerment, success 
of the programmes in  productive efficiency,  saving habits,  poverty eradication etc.  the funding 
ability,  income  improvement  has  been  widely  discussed  (Rakowski,  1994).  There  are  many 
empirical models incorporate various indicators of empowerment, which came under discussion and 
debate (Anand 2002). The role of NGOs in promoting the welfare through SHGs got attention in 
some of the empirical studies and the argument is that private sector business leaders, foundations, 
and corporations has created new local-level NGOs for promoting micro-enterprise development 
through “massification”  applying  the  NGO method and philosophy on  a  broader  scale  to  help 
increasing number of entrepreneurs and poor families. Some studies also examined the advantages 
of organizing women groups thereby creating a new sense of dignity and confidence to tackle their 
problems with a sense of solidarity and to work together for the cause of economic independence 
(Choudhary  1996).  Some other  had  described  the  factors  affecting  group dynamics  and group 
functioning such as feeling of solidarity and pervasive benefits from group formation, increased 
awareness of group members, self reliance, and transparency. They feel that dependence on outside 
source either in material or human terms exist and so the group autonomy is not attained in many 
cases. 
2. Kudumbashree- A micro finance programme
Kudumbashree is a women based participatory poverty eradication programme launched on 
1st April 1998 by the Kerala state government with the financial support of NABARD (National 
Bank for Agriculture and Rural Development) and the central Government. Thus it is a partnership 
of four major agents –Central government, state government, local bodies and NABARD. Briefly, 
Kudumbashree functions at the weekly neighborhood group meetings, women deposit savings, and 
the collective savings which in turn provide the basis  for small  loans.  In order to qualify as a 
member  of  the  Neighborhood  Group  (NHG),  the  women’s  household  must  be  “poor”.  For 
identifying risk families i.e., a household is considered poor if it demonstrate four or more of the 
following nine risk factors.
1. No land or less than 5 cent of land
2. No house or dilapidated house
3. No sanitary latrine
4. No access to safe drinking water within 15 meters radius.
5. Women headed household, presence of a widow, divorce, abandoned women unwed mother.
6. No regularly employed person in the family.
7. Socially disadvantaged groups such as SC /ST
8. Presence of mentally or physically challenged person or chronically ill member in the family, and 
9. Families with out colour television.
Women who have exceptional capacity and seek further opportunity may be invited to join 
Self  Help  or  Enterprise  Group  [SHG]  comprising  similarly  entrepreneurial  women  from other 
NHGs. After accumulating reasonable amount of resources as thrift from each member regularly, 
many of these respondents would no longer be considered poor by the above criteria. If the bank is 
satisfied with the group in terms of 1) genuine of demand for credit 2) Credit handling capacity of 
the  members  3)  repayment  behavior  within  the  group  and  4)  the  accounting  system  and 
maintenance of the records, the bank extends a term loan of smaller amount to the group.
The promotion of income generation activities for the poor rural women is perceived as a 
powerful  medium  to  resolve  several  socio  economic  problems  such  as  reduction  in  poverty, 
provision of goods and services which are appropriate to local needs, redistribution of income and 
opportunities in the community etc. Thus financing through SHG’s accrued benefits like
1. Savings mobilized by the poor 
2. Access to the required amount of appropriate credit by the poor 
3. Meeting the demand and supply of the credit structure and opening of new market for 
financing institutions
4. Reduction in transaction cost for both lenders and borrowers
5. Tremendous improvement in recovery 
6. Heralding a new realization of subsidy less and corruption less credit and
7. Remarkable empowerment of poor women. 
Above all,  it  builds  mutual  trust  and confidence between bankers  and rural  poor  to  encourage 
banking in a segment of population that formal financial institutions usually find difficult to reach.
3. Research Question
From the preliminary analysis attempted so far seek to verify whether there has been any 
significant economic impact and whether the economic empowerment has resulted in the generation 
of a set of self reliant women.
4. Methodology and Data Source
Information was collected through both primary and secondary data. Three Kudumbashree 
units were covered using questionnaires and direct enquiry method. Secondary data were collected 
from published books, reports, periodicals etc. Comparative analysis of their economic conditions 
were undertaken-pre Kudumbashree and post Kudumbashree period. To find out whether there has 
been a significant increase in the incomes of Kudumbashree households over the entire period t test 
is used to test the hypothesis.
5. Hypothesis
Null hypothesis (Ho): There has not been a significant improvement in the income of the 
poor women due to credit support of the scheme.
Alternative hypothesis (Hi): There has been a significant improvement in the income of the poor 
women due to credit support of the scheme.
6. Case Study 
Three  Kudumbashree  units  in  Thiruvananthapuram  district  of  Kerala  were  selected  as  the 
sample area. The units, which are working with comparative efficiency, were selected for the study. 
The names of the units are as follows.
a) Techno world Digital technologies
b) Yathrashree-Canteen
c) Varsha water meter repairing unit
Techno  world  digital  technologies  unit  was  established  in  1999,  September  15th with  ten 
members. Yathrashree canteen unit was in 2001 May 15th with 10 members and Varsha water meter 
repairing unit  was started in 2001 August 20th with eleven member each.  Before analyzing the 
economic impact of the programme on the beneficiaries it  is pertained to understand the social 
structure like age, cast, education and marital status of the members.
TABLE 1
Social Structure
Age composition        % Cast structure      % Education            % Marital status     %
20-30 64.5 SC/ST 16.1 Illiterate - Single 35.5
30-40 29 0BC 45.2 Primary 3.2 Married 51.6
50 & above - SSLC 42.2 Divorced 6.4
PDC 19.4
others 26
Source: Primary survey
The age composition of the three units in the table 1 points that majority of the members 
belongs to the age group of 20-30. There are nine persons in the age group of 30-40 constituting 
29% in the total. It reflects the mental setup of young people to undertake self employment and such 
activities. Cast status of the beneficiaries in table indicates that 61.3 % of the beneficiaries include 
the SC and OBC. The fact that 61.3% of the beneficiaries of the programme were focused on the 
backward communities was indeed a  satisfactory aspect.  The education profile shows that only 
about 54.6% of the women had education up to SSLC. From the Marital status of beneficiaries 4 
women  of  the  sample  population  are  either  widowed or  divorced.  In  this  case  Kudumbashree 
income is the main supportive income. Unmarried women are also having significant place in these 
activities, their eagerness to earn money for their own needs are also significant.
In order to analyze the level of income of beneficiaries house holds, two time periods are selected:
1.  Pre Kudumbashree level of the income of beneficiaries house hold
2. Post Kudumbashree level of the income of beneficiaries house hold
TABLE 2
Mean income level of families before and after the generation of Kudumbashree income.
Name of the unit Pre Kudumbashree 
level
Post Kudumbashree
Level
Techno world, 
Yathrashree, Varsha
Mean
N
Standard Deviation
4638.7097
31
1736.9854
5766.1290
31
1859.0045
Source: Primary survey
The  table  shows the  mean  income level  of  families  before  and  after  the  generation  of 
Kudumbashree income. As many of their work were seasonal they could get work only for about 15 
to  20  days  in  month.  Hence  fluctuating  income created  uncertainity  about  varying  purchasing 
capacity among members. In order to find out whether the difference in family income before and 
after the introduction of the scheme is significant, certain statistical hypothesis is formulated and the 
analysis is further through the t test.
Null hypothesis-There is no significant difference [improvement] between pre Kudumbashree levels 
of family income and post Kudumbashree level of family income
Alternative hypothesis- There is significant difference [improvement] between pre Kudumbashree 
levels of family income and post Kudumbashree level of family income
In symbols,
   Ho       µ 1 = µ 2 
H1      µ 1> µ 2
[µ 1 =Mean income of the family after the introduction of the scheme
 µ 2 = Mean income of the family before the introduction of the scheme
Ho=Null Hypothesis, H1=alternative Hypothesis]
As per the formula for t test 
  t = X-Y/SE
Where X=mean income of the family in the post Kudumbashree period
        Y=mean income of the family in the pre Kudumbashree period
SE= √S² [1/n1+1/n2]
S²=n1 S1²+n2 S2²/n1+ n2-2
S1²= (∑y²/n)-(Y)²
S2²= (∑x²/n)-(X) ²
The result of the t test conducted as to whether a significant increase in income has occurred over 
the period is given in the following table 3
TABLE 3
Income level over the entire period of test
Units Calculated
value
Table 
value
Level of 
significance
Degree of 
freedom
Decision 
regarding null 
hypothesis
Techno world digital 
technologies, 
Yathrashree, Varsha.
10.09 1.697 5% 30 Rejected
Source: Primary survey
t =X-Y/SE = 5766.1290-4638.7097/112.0157
                  =1127.4193/112.0157
                  =10.06
DF=n-1 =31-1=30
Results of the t test conducted have shown that there has been significant increase in the 
income levels of Kudumbashree house holds over the entire period. It needs to be ascertained as to 
whether the increase in income levels of house holds was mainly due to Kudumbashree income or 
not.  Hence  the  change in  family income in each  of  the  unit  was  computed  and percentage  of 
Kudumbashree income was also calculated. The following table gives the idea of the contribution of 
Kudumbashree income to the entire change in the family income.
TABLE 4
Impacts of the Kudumbashree income on the total change in family incomes
Units Change in Family 
incomes
Kudumbashree 
incomes
Percentage of 
Kudumbashree 
incomes
Techno world digital 
technologies
6000 2000 33.3
Yathrashree 57500 10000 17.35
Varsha 61250 11750 19.18
Source: Primary survey
7. Conclusion
Kudumbashree incomes contributed a significant portion of the entire income. Economic 
impact is there but a major cause for the increase in family incomes may be due to a rise in income 
of other family members or other sources. But as the above table reveals some portion is from the 
Kudumbashree  incomes.  Of  course  there  is  economic  betterment.  These  being  the  economic 
indicator which points to positive impact of the development programme of Kudumbashree, certain 
other facts need to be recounted. This includes the dimension of motivation aspiration, overcoming 
the fear of authority, confidence in once on abilities, autonomy in the use of resources in house 
holds and participation in decision making in the house holds.
One interesting feature of the primary survey was that in the Yathrashree canteen units, 
when members of the group were individually interviewed, many were not even aware of the capital 
in  the  beginning  of  the enterprise.  Only the  group organizers  could answer this  question.  This 
indicates lack of information among the beneficiaries. Regarding the query of expansion of units, 
majority lacked motivation. They were apprehending of the future of their own existing business. 
An enterprising drive was found lacking among all  the beneficiaries.  But the economic change 
which imposed in them provides a new confidence on their own abilities. However identification 
and selection of members for this scheme has to be made carefully. The unemployed women folk 
with in the age group of 18-60 whose opportunity cost should be near zero and who belongs to the 
weaker sections should be the target groups. Weekly meeting of SHG’s is not regular in some cases, 
so steps should be taken to conduct it regularly. The proper selection of activist for the group is 
crucial for its survival and expansion. Efforts should be, made to identify the suitable activity based 
on resources, skills and markets. The resources for the activity must be either available locally or 
procurable  easily  and  economically.  Above  all,  market  condition  should  be  ascertained  before 
setting up of units. The unhealthy political influence should be avoided. To empower is to develop 
and progress especially in the context of freedom she achieves to enhance her self respect and self 
dignity through economic independence. Hence there is need to measure the freedom she achieves 
for empowerment.
Selected Reference
1. Shylendra H S, (1998), Promoting Women’s Self Groups: Lessons from an action, 
Research project of IRMA, Gujarat
2. Anand Jaya, (2002), Self-Help Groups in Empowering Women: Case study of selected 
SHGs and NHGs, KRPLLD Centre for Development Studies, Thiruvananthapuram 
Discussion Paper No. 38
3. Chowdhary Anand Meenaxi, (1996), ‘Empowering strategies for rural Women in India’, 
Kurukshatra, March
4. Rakowsky C.A, (1994), Convergence and Divergence in Informal Sector Debate, World 
development 22(4)
5. Sen A.K, (1999), Development as freedom New York, Oxford University press
6. Reddy, K. V, (1998), Rural Development in India: Poverty and Development, Himalaya 
Publishing House, Bombay.


Women empowerment and micro finance : Case study from Kerala

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