Microcredit and Empowerment of Urban Women: A Study from Eastern India

• DOI: http://doi.org/10.1002/jsc.2003
• Published date: 01 March 2015
• Date: 01 March 2015

Strat. Change 24: 149–163 (2015)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2003 RESEARCH ARTICLE

Copyright © 2015 John Wiley & Sons, Ltd.

Strategic Change: Brie ngs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2003

Microcredit and Empowerment of U rban Women:

A Study from Eastern I ndia

1

Debdatta Pal

Indian Institute of Management Raipur , India

Oindrilla Dutta

Shri Shankaracharya Institute of Professional Management and Technology , Raipur , India

In credit markets where imperfection is the rule rather than the exception, col-

lateral has evolved as an established practice by institutional lenders to address the

issues of adverse selection and moral hazard associated with credit contracts. In spite

of a continuous government thrust to provide  nancial services to the excluded,

institutional lenders are often not keen to lend to the marginalized population,

who usually lack marketable collateral and creditworthy projects ( Fisher and

Sriram, 2002 : 40). While borrowers are confronting transaction costs ( Mahajan

and Ramola, 2003 ), commercial banks are asking for more collateral, blaming

rising default rates ( Basu, 2006 ), which seem to be limiting credit provision. In

this context, microcredit has obviated the need for marketable collateral by insti-

tuting joint liability and peer pressure as a collateral substitute ( Besley and Coate,

1995 ). It arranges for door-step delivery of small amounts of credit not only for

productive investment, but also for consumption smoothing and contingency

( Morduch, 1999 ).  us, microcredit aims to cover the economically underprivi-

leged who face di culty in accessing institutional credit for emancipation from

the vicious poverty cycle, social inclusion, and empowerment ( Milana and Ashta,

2012 ). But historically, women have formed the major clientele of microcredit:

according to a recent estimate (see Reed, 2011 ), around 75% of microcredit clients

are women.  e rationale behind this gender-speci c microcredit delivery mecha-

nism has been captured in the existing literature (for a detailed review see Cheston

and Kuhn, 2002 ) as follows:

First, women are most vulnerable and among the poorest of the poor.

Second, women have minimum access to fundamental human rights.

The male inclusivity of the change

process has established the

program on a strong footing.

A bottom-up approach helped the

program to cater for the needs of

the local community.

The success of the program was

also crafted through the self-

selection of business activity by

loaned members.

1 JEL classi cation: G21; J16; P36.

A

positive social and  nancial change is detected in the lives of women members of

the government-sponsored G olden J ubilee U rban E mployment S cheme.