Financial Inclusion of Women through Microfinance Institutions;

Lessons from Kerala

By: ​Caroline C. Neriamparampil
Social Development Specialist, Kudumbashree
(State Poverty Eradication Mission), Government of Kerala.

Abstract

Development experiences across the globe suggest that augmenting the capacities of women can
lead to the empowerment of women. Financial inclusion is one among effective strategies to
address the gender equality concern being raised in the fifth goal of Sustainable Development
Goals. Financial inclusion can provide women the access to financial resources and the
opportunity to enhance their capacities with regard to financial management and thus to improve
their quality of life. Microfinance is proved as an effective tool to increase the financial inclusion of
women and in the service delivery, civil society organizations can play a leading role as a
microfinance institution. This study explores how microfinance can lead women to financial
inclusion with the selected case studies from Kerala state of India and examines the scope of
replicating those learning to other countries in the Asian region. This research paper also throws
light on the relevant recommendations for government, civil society organizations and international
organizations.

Key Words: Gender Equality, Sustainable Development, Microfinance, Financial Inclusion

1. Introduction and Background

United Nations Universal Declaration of Human Rights article 2 prescribes equal rights and
freedom for everyone and thus advocates for gender equality. This implies that women and men
should be allowed to enjoy equal rights for dignity, freedom, equity, justice, and peace. UNESCO
(2000) explains that “gender refers to social differences and relations between men and women
which are learned and varied among societies, cultures and in time”. As a concept, gender equality
elicits equal right for all human beings, both men, and women to develop their abilities and make
choices, irrespective of any limitations by society placed on them. This has got a wider meaning.
The differences between men and women with regard to behaviour, aspirations and needs are to
be valued, favoured and considered equally according to the needs. It is not mandatory that the
rights, responsibilities, and opportunities of one to be the same, above or below of the other and it
is not sex-dependent.
(Sen, 2001) discusses different forms of gender inequality, which comprises of mortality
inequality, natality inequality, basic facility inequality, special opportunity inequality, professional
inequality, ownership inequality and household inequality. (Sen, 2001) also shares that the reach
of household Inequality takes in unequal relations within the family and also results in inequalities
in employment and recognition in the outside world.
The United Nations Fourth International Conference on women held in Beijing well
recognized the importance of gender equality. In Beijing, gender equality concerns were placed
among the United Nations Millennium Development Goals and later in Sustainable Development
Goals as well. The fifth goal of Sustainable Development Goal can be stated as “Achieve gender
equality and empower all women and girls”. Thus the fifth goal addresses women’s equality and
empowerment. UN Women.(n.d).shares “Women’s equality and empowerment is one of the 17
Sustainable Development Goals, but also integral to all dimensions of inclusive and sustainable
development”. ​Achieving Gender equality is not just a fundamental right. It is a necessary mandate
for building sustainable societies. ​UNDP (2013) shares that it was in the middle of the 20th century
that human rights movements started across the world and during 1960s, attempts for women’s
movements also started. These movements have helped to get global attention for gender
inequality.
In spite of substantial measures at the national and international level, gender inequality still
exists. No nation has so far achieved 100% gender equality s but countries such a Norway,
Australia and Switzerland tops in performance. Human Development Report 2016 places India as
a nation of medium Human Development with the rank of 131, scoring the value of 0.624. India’s
score in Gender Development Index is 0.819. The coefficient of inequality in the country is 26.5.
Males in the country have a Human Development Index value of 0.671 whereas females have
0.549.
Looking into the after-effects of inequality, it obstructs development and thereby it will
challenge economic progress, dilutes democratic life and intimidates social cohesion. United
Nations Development Programme (2013) put forward “evidence shows that a significant narrowing
of gaps in critical capabilities like health and education has not translated for women into
equivalent reductions of inequality in other domains, such as livelihoods and political participation”.
It also states that other barriers such as cultural norms and discriminatory behaviour incorporated
in our economic and social institutions may affect the opportunities available to women”.
Asian Development Bank (2016) put forward that “If gender inequality is completely
removed, the per capita income will be 30.2% higher than the benchmark economy after one
generation and 71.1% higher after two generations. The income in a gender-equal economy will be
about 6.6% and 14.5 % higher than the benchmark economy after one and two generations,
respectively. By eliminating the gender inequality, the annual growth rates of per capita income
and aggregate income can be enhanced by approximately 1% and 0.2%, respectively”. By
providing women, opportunities to come out of inequalities and to strengthen their capabilities,
households and societies and nations may benefit. Hence adequate measures at the global level
are needed to improve the conditions of women is needed. Here comes the importance of
empowerment programmes among women.
World Bank.(n.d).describes empowerment as “a process of enhancing the capacity of
individuals or groups to make choices and to transform those choices into desired actions and
outcomes”. Major constituents of women empowerment are decision making power, household
features, public participation, credit facilities available, raising voice, freedom, mobility, respect,
economic participation, and leadership qualities. (Rappaport, 1987.as cited in (Zimmerman,1995))
developed an understanding that empowerment is a mechanism by which people, organization,
and communities gain mastery over their lives whereas (Sen,1993.as cited in ​Shodganga,​ a
reservoir of Indian Thesis) perceives empowerment as a step beyond the choice. It is the capacity
to fulfill the capabilities. The Capabilities can be determined by the variety of other factors such as
personal attributes, social positions, and individual capacities etc.
Empowerment gives people freedom of choice and action, which enables them to create
more meaning to the life and own those decisions which may affect them. The four critical
elements of empowerment introduced by the World Bank.(n.d.) constitutes the access to
information, inclusion and participation, accountability and local organizational capacity. Having a
sustained income opportunity is essential to sustain the development opportunities available to a
person. It is essential to give women economic empowerment as it can make them stronger and
can increase the public participation of women. Consequently, they may create influence in varied
developmental concerns and thus the economic empowerment of women leads a nation to
sustainable development. .
Sida.(2015) defines women’s economic empowerment, as the process which increases
women’s real power over economic decisions that influence their lives and priorities in society. It
can be achieved through control over critical economic resources and opportunities, as well as the
elimination of structural gender inequalities in the labour market. Overseas Development Institute
(2016) gives a note on the important factors of that women’s economic empowerment which
includes “education, skills development and training, access to decently paid work, property,
assets, financial services, collective action, leadership and social protection. Thus the economic
empowerment of women is all about increasing the capabilities of women so as to achieve them
the access to capabilities, assets, financial services, better nutritional status, higher living
standards, improved self-respect, and self-esteem. Women’s economic empowerment also
improves household relations, strengthens women’s role in the decision-making process in the
family and provides them the better access to knowledge. Social empowerment is also achieved
through economic empowerment.
The gender equality goal (goal No.5) among the Sustainable Development Goals, look
forward to bring out women’s fruitful participation in leadership and decision making in the areas of
political, economic and public life. UN Women discusses the need to link gender equality and
sustainable development. Considering the moral importance to the issue, the uneven impact of
social, economic and environmental distress on women, especially in bringing sustainability to the
families and the urgent need to build up women’s capacities for coordinating gender equality and
sustainable development outcomes, it is highly inevitable to link gender equality and sustainable
development. UN Women (2014) states “Linking gender equality and sustainable development is
important for several reasons. First, it is a moral and ethical imperative: achieving gender equality
and realizing the human rights, dignity and capabilities of diverse groups of women is a central
requirement of a just and sustainable world. Second, it is critical to redress the disproportionate
impact of economic, social and environmental shocks and stresses on women and girls, which
undermine the enjoyment of their human rights and their vital roles in sustaining their families and
communities. Third, and most significantly, it is important to build up women’s agency and
capabilities to create better synergies between gender equality and sustainable development
outcomes”.
Thus in the light of above background, this paper addresses the concerns of the fifth goal of
sustainable goals, which tries to achieve equitable status among women and girls and to empower
them. The importance of financial inclusion to bring equitable status among women and the
contribution of the civil society organizations to achieve this is also discussed in the coming
sections.

1.1.​ ​Financial Inclusion; a key for Sustained Nations

Financial Inclusion induces sustainable development and it targets the poor, who are left otherwise
from the formal financial services. These poorest of the poor still do not have proper access to
financial services which includes access to savings, credit facilities and insurance services.
Rangarajan (2008) makes it clear that financial inclusion is a process of providing the vulnerable
groups, the access to adequate financial services in a timely manner and at an affordable cost. ( as
cited in Shodganga, a reservoir of Indian Thesis “Chapter II Financial Inclusion and Women
Empowerment”). World Bank perceives financial inclusion as a strategy to reduce poverty. It has
developed a strategic framework to measure the inclusion. In simple terms, financial inclusion can
be understood as a process where financial services are made available to all citizens, including
the poor and needy at an affordable cost and they are able to make use of the service.
Globally women are still behind men in accessing financial services. (“UN Women,”n.d)
(“Vox.LACEA, Online Resource Centre for Latin American and Caribbean Economic Association,
n.d) refers to World Bank data 2014 and put forwards “In low and middle income countries, the
difference between men and women with a bank account in 2014 was 9%. 50% of women have
access to financial services, compared to 59% of men. Women’s main constraints in accessing
financial services are poor financial literacy and less confidence in their financial skills and
knowledge. ​The Global Findex database says that “Forty-two percent of women and ​girls
worldwide, approximately about 1.1 billion remain outside the formal financial system” (as cited in
“Consultative Group to Assist the Poor”, n.d)
Financial inclusion has far reaching benefits. It can create Gender equity as well.
Kunt.et.al.2018 discusses “A study in Kenya found that access to mobile money services delivered
big benefits, especially for women. It enabled women-headed households to increase their savings
by more than a fifth; allowed 185,000 women to leave farming and develop business or retail
activities; and helped reduce extreme poverty among women-headed households by 22 percent”​.
Mostly women are the victims of poverty and financial inclusion among women can be achieved by
empowering women and thereby supporting them to have a greater control over their financials.
Savings accounts may provide them with a platform for savings and digital payments which in turn
can help them in saving their time. This can be used productively for household and employment
purposes. By giving them financial inclusion, we can achieve inclusive growth and poverty
reduction. Majority of women depends on their husbands for their personal expenses. With the
access to financial services, they will have a better say in taking decisions on household finances
and will be able to plan better the family expenses. When women access financial services, it not
only benefits her, rather it benefits her family, community, and nation.
Women do not seem to score better in accessing the accounts for saving, payments and
investments. (“United Nations Development Programme”, n.d) reviews that women faces more
challenges because of the specific structural limitations in accessing various services. Gender
Restrictions placed on them might obstruct the women’s movement in public spaces and in engage
in business. Along with support to strengthen the capacities of women, it is also needed to create a
growth promoting environment. Women are more concerned about the family and they may spend
whatever they have for children’s education and other family needs such as healthcare and
housing. These are developmental activities, which is going to sustain for generations. Thus
women’s economic empowerment is highly beneficial to the society as it provides increased
participation, opportunities and greater control over the resources and this will eventually contribute
to inclusive economic growth, poverty eradication, social development and gender equality. United
Nations Development Programme.(n.d.) also deliberates that Financial Inclusion is the key to
achieve the United Nations 2030 agenda of Sustainable Development and it will create a positive
impact in the lives of women in the areas of health, education, poverty, employment, and
inequality.

1.2. Financial Inclusion; Contribution of Microfinance and the Role of Civil Society
Organizations

Economic and social capabilities of the financially weaker sections have to be enhanced to take
them to the mainstream society. Microfinance Institutions provides smaller loans to the poor
without any collateral security and they also encourage them to have regular savings. As a
financial tool, it bridges the gap between the poor and the formal financial institutions. In many
countries across the globe, it is been accepted as a powerful tool for poverty alleviation and
financial inclusion.
Realizing the need to facilitate the poor to access the flexible credit facilities, microfinance
was first introduced in the late 1970’s in Bangladesh. Microfinance Gateway.(n.d.).defines
microfinance as a movement which visualizes a world where the poor and low-income households
get sustained access to quality and affordable financial services. These financial services may also
include credit facilities for income generation activities, building assets, maintaining consumption
and for the protection against risks. These products are delivered to meet the financial needs of the
poor. Microfinance Institutions (MFIs) are the organizations which provide financial services directly
to the people, majorly poor families. They generally access financial resources from the formal
institutions and provide the services to the poor, who are otherwise excluded from accessing the
financial services. There are different models of microfinance programme. The Global
Development Research Center.(n.d.).provides an account on about 14 different models of
microfinance which includes; associations, bank guarantees, community banking, cooperatives,
credit unions, group, individual, intermediaries, NGOs, peer pressure, ROSCAs, small business
and village banking models.
Financial inclusion aims at providing even the poorest, the access to financial services. Our
formal financial institutions do not reach to the poor due to the irregular patterns in their income,
lack of credit information, lack of collateral security, financial illiteracy, requirements for small-sized
loans and high transaction costs for the same. Microfinance programme has significant advantages
in this regard. It has many benefits to the women and poorest communities at large. They make
banking easy for the poor with the simplified procedures, enables them to have regular savings,
easy and affordable repayments and also help them to have a community sense and group feeling.
Singh and Yadav (2012) make a note on the special features of microfinance in this regard. They
are aimed at the poorest, empowers poor women, promotes self-employment and income
generation activities, increases the productivity through self-employment in the informal sector, a
tool for social change than a financing system, lending technology can replace the presence of
informal lenders, gives even the small size of loan as per the requirement, easy repayment system
with affordable weekly installments and good recovery rates.
Bosco (2016) comments on the links of Microfinance Institutions and financial inclusion
based on an impact assessment study carried out in Rwanda. The study depicts that microfinance
institutions provide credit delivery and other credit plus services at the doorstep of people. This
supports the MFI clients in empowerment. The findings of the study revealed a positive relationship
between financial inclusion and improvement of welfare conditions of households where the Micro
Finance Institutions are profitable and sustainable. The profit has shown the positive correlation
with the type of savings and repayment. Micro Finance Institutions can improve the welfare
conditions of a client by giving due respect to financial inclusion and to the social and financial
performance indicators.
The goal of financial inclusion through microfinance can be best achieved through civil
society organizations. The community we aim to reach is poor and excluded. This necessitates the
urgency of community-based activities and the importance of civil society organizations. UN
Guiding Principles Reporting Framework.(n.d.).remarks that civil society organizations are
“Non-State, not-for-profit, voluntary entities formed by people in the social sphere that are separate
from the State and the market. They can include community-based organizations as well as
non-governmental organizations (NGOs).” Hence CSO’s, either an NGO or CBO can strive for
sustainable development and they can play a vital role in providing community services. In doing
so, they act as a link between the people and state, and also between people and market.
Van Rooy and Robinson (1998) remarks that civil society organizations ultimately has two
roles; building democracy and improving development (as cited in Ibrahim and Hulme, 2010) As
the part of the community development programmes, these organizations carry out capacity
development initiatives which facilitate the local community to develop varied resource of social,
capital and human in nature. They help the community to upgrade knowledge, skills and nurture
public participation. For the implementation of microfinance programmes, they usually form Self
Help Groups and handhold the SHGS for accessing savings and credit facilities.
(Daily News Egypt,2018) reports that civil society organization plays an active role in
supporting low-income groups to overcome poverty through microfinance services and can reduce
the financial burden on the budget of the state. The report refers to a study published by the
Egyptian Centre for Public Policy Studies titled “Role of Civil Society in Economic Development”.
The report of Daily News Egypt shares “ 76% of those who received it felt that they are more
financially independent. 50% felt a positive impact on the quality of consumer goods they use in
terms of the type and amount, and 40% of those who have children said they feel a positive
change in the level of education their children received. The same percentage reported receiving
better medical services” It is also highlighted in the report that about 62% of the activities of civil
society organizations are for the promotion of civil and political rights whereas 71% and 74% for
the economic and social rights, and women’s rights respectively. Thus no doubt, it can be inferred
that the civil society organization can support the excluded communities by playing the role of a
catalyst and they can ensure sustainable development.

1.3. Micro Finance and Financial Inclusion; A Kerala Picture

Political empowerment of Indian women is as good enough to score 21​st​​ position in the Gender
Equity 2017 Report of World Economic Forum. The empowerment initiatives have to give
continued emphasis on women in the areas of education, health and economic participation.
According to the World Economic Forum’s annual Global Gender Gap Report suggests that India’s
scores in gender gap for economic participation is about 66%. Political empowerment of women is
something which India can take pride. Though the graph of the gap in other sector is towards the
downside of the curve, the performance in economic empowerment has to be increased.
Financial inclusion can bring promising results for economic empowerment. ​The Global
Findex ​Database 2017. (​as cited in World bank.(n.d).).reports that about 43.1% of Indian women
​ ore than 15 years have accounts and 36.3 % of poor women have accounts. This is
aged m
compared to 37.1% of women in South Asia. But the scores with regard to savings and borrowing
are low. The report also shares that digital payments are not much progressive in India. However,
the role of community empowerment activities and microfinance programme cannot be denied for
what we have achieved so far.
FINclusion Lab. (n.d.).reports that in November 2014, Kerala bagged the status of “one of
the first states in India where every household have access to at least one bank account. The
welfare pensions and wage transfer under Mahatma Gandhi National Rural Employment
Programme is already linked to post office and bank accounts. Financial Inclusion is beyond
opening bank accounts and microfinance. It has to ensure the delivery and usage of all financial
services including savings, credits, payments, insurance and digital payments. The process of
financial inclusion is not even in the state. As reports, the state experience variation in this regard.
“​​Malappuram, Kasargaod, Kollam ,Idukki and Palakkad are the least performing district whereas
Ernakualam, Thiruvananthapuram and Pathanamthitta are the forerunners. (Pillai,2012) reports
that Ernakulam district was declared as the first district in the country to achieve ​meaningful
financial inclusion​, a project of Reserve Bank of India which integrates the operative bank accounts
with other financial services such as micro-credit, micro-insurance and remittance facilities.
However, microfinance programmes in different parts of India and specifically in Kerala
state have a definite share for achieving financial inclusion among women. CH.Gangadhar Sujatha
and P.Malayadri (2015), Swain (2007) and Sida (2006) have revealed interesting findings in this
regard in different parts of the country. The findings of these studies revealed the potential of
microfinance as a tool for women empowerment. The contribution of microfinance in the increased
economic security among women, women’s role in household economic decision making, family
decision making, increased capacities for managing the procedures of banking and other welfare
services. It was also shared that the attachment to an NGO provided the members the support in
accessing financial services and specialized training which created a greater impact on their lives.
Similar findings are observed in various studies conducted in Kerala as well.
Economic empowerment programmes for the benefit of women existed in the state since
earlier. The microfinance programme in the state portrays a unique developmental model which
addressed the issues of poverty and gender inequality through community based institutions. This
might have helped the state to be a forerunner in many other developmental initiatives. Financial
inclusion exercise in the state got the support of these institutions. Earlier, Kerala was dependent
on indigenous banking where the people used to depend on private money lenders and chit funds.
These were the earliest informal financial institutions in the state. Nair and Patani (2016) provides
evidences for this. These informal institutions were later replaced by the formal financial institutions
and microfinance institutions in the state. Microfinance Institutions in Kerala has a long back
history. Church based institutions used to function in the state since early 20​th century in the form
of credit union group which used to organize the poor into a large group of about 200 members .
This group used to have small amount of savings for their common benefit. The idea behind this
type of group is to assist the poor to meet their emergency needs and to protect them from the
money lenders. The social, cultural and economic background of the organization does possess a
great influence in the programme. Many of the NGO’s have different activities such as credit
unions, farmers clubs and SHGs as reported by Krishnan (2011). In this model, there was not a
participatory decision like the modern microfinance institutions.
The modern microfinance institutions started existing in Kerala towards late 1980s and
early 1990s. Thus Community Based Organizations named “Community Development Society
(CDS)” was formed with the support of Government of Kerala. First of such CDS in the state was
formed in Alapuzha district. Later under the name Kudumbashree, the programme was further
experimented in Malapppuram district in 1994 and later to other parts of the state. This is
grassroots level women focused poverty eradication programme, meant for the women below
poverty line. Reports suggest that the women members in the programme are empowered through
microfinance, Micro enterprise and convergent community action. In the Ninth Five Year plan,
development of women was given special emphasis and the local bodies were advised to earmark
10% of the plafond to carry out village level activities for neighborhood and self help groups. This
ensures the sustainability of the programme. These groups have the access of local body level
women component fund and the participation of women is ensured in the decentralization process.
As pointed out by Krishnan (2011), the joint-liability, strict credit discipline, correct
repayments and collective monitoring (by peers) system performed in the microfinance programme
ensures sustainability for the programme and it is always the part of poverty reduction programme.
Here in this state, both microfinance programmes; Government-based and NGO-based coexist
and have played an important role in making microfinance programme successful. When
Kudumbashreee i​ s a government supported women focuses participatory model, NGO model w
​ ith
their involvement in SHG formation, capacity building and income generation activities has a long
history and have contributed to the growth and promotion of the microfinance. Recent times have
witnessed the entry of private players as well.
This coexisted model of state is a unique model and has received appreciation at national
and international level for its contribution as a participatory poverty-reduction model. Hence there is
an urgent need to study the financial inclusion process carried out by the different development
players in the state.

1.4. Research Methodology and Analytical Framework

The present paper attempted to study the

● Impact of microfinance institutions in equipping women to achieve financial inclusion.

● Relevant policies and strategies of Micro Finance Institutions in supporting women to
access financial services.

The primary aim was to understand the process of financial inclusion of women through
microfinance activities. This study carried out in Kerala was qualitative in nature, using the case
study method and gave more emphasis on the contribution of the institutions. Three
organizations from diverse backgrounds (NGO model, Government supported Community Based
Organization and an NGO converted MFI) were taken as samples to understand the process in
detail. Since the study was qualitative in nature, it relied more on the qualitative process and
hence case study with the help of in-depth interviews with the representatives of respective
organizations were carried out.
Analytical framework was developed with the support of ‘Capability Approach of Amartya
Sen and ‘Financial Inclusion Strategies reference framework’ of the World Bank. Amartya Sen’s
Capability Approach addresses gender equality concerns. Sen advocated that in order to
understand the gender equality concern, we should compare capabilities and functioning.
Robeyns(2003) shares that Amartya Sen’s capability approach focuses on the understanding of
functionings and capabilities to carry out functioning​​. Hence the wellbeing is dependent on ​the
capabilities of people as described in Issues of India.(n.d.)​​. World Bank’s Financial ​Inclusion
Strategies: reference framework suggests framework for measuring financial ​inclusion wherein
the bank has adopted core financial inclusion indicators developed by Global Partnership for
Financial Inclusion sub group on data and measurement ahead of G20 summit in 2012. The
measurement carried out by the Bank was in three dimensions; access, usage and quality. In this
study, out of the G20 indicators, indicators for individuals such as formally banked adults, savings
propensity, credit at regulated institutions, cashless transactions, financial knowledge and
financial behavior etc are applicable to this study.
In this study, an effort is made to combine ‘Capability Approach of Amartya Sen and
‘Financial Inclusion Strategies reference framework’ of the World Bank. Referring to the capability
approach, the efforts of the civil society organizations was studied to understand the increase in
the capabilities of women to achieve financial inclusion as per the selected indicators suggested
in the world bank’s framework. In simple terms, the present article looked on the efforts of
organizations in increasing the capabilities of women and how the increase in capabilities has
helped poor women to get financially included. Within this developed framework, coding and
thematic content analysis both within the case and cross the case was carried out for data
analysis. The details of Analysis are discussed in the coming sessions.

2. Discussion: Civil Society Organizations Contributions to Sustainable

Development

This paper highlights the importance of Civil Society Organizations in addressing the fifth goal of
Sustainable Development Goals (SDG). The fifth goal of SDG can read as “Achieve gender
equality and empower all women and girls”. To attain equality, women needs to be empowered
economically and they must have access to the financial resources. Global experiences on
financial inclusion shares that financial inclusion of women is very much essential to achieve
gender equality. In India, it is proved that Microfinance Institution’s has played a critical role in
taking the banking services to the poor. The Kerala State of India has an internationally accepted
development model in this regard to offer.
This section of the paper discusses the process how Kerala’s Microfinance Institutions have
played the role of Civil Society Organization(CSO) and increased the capabilities of women so as
to support them to achieve financial inclusion. Existing literature suggest the potential of
Community Based Organization (CBO) to promote financial inclusion among the women,
especially the poorest. For this purpose, three organizations from diverse backgrounds were
selected as samples. A Community Based Organization supported by the Government
(​​Kudumbashree)​ , a Non-Government Organization (Sahrudaya- Welfare Services, Ernakulam) and
an NGO converted MFI were studied for this.

Case 1: ​Kudumbashree;​ Women focused Community Based Organization running with the
support of Government of Kerala

Kudumbashree​ Key Facts

Families covered 43,06,976

Total number of Neighbour Hood Groups 2,77,175

(NHG)

Total number of Area Development Societies 19,854

Total number of Community Development 1065

Societies

Thrift Collection 4008 Cr

Internal Loans 16,252.42 Cr

NHG’s linked 186682

Live linkage loans 9334 Cr

 Matching Grant availed NHG’s 103056

Matching amount 4057.2 lakhs

Kudumbashree i​ s the largest women based CBO in Asia and it was launched by the
Government of Kerala introduced a Kudumbashree​- State Poverty Eradication Mission to address
poverty concerns in an effective manner. Realizing the exclusion of the women’s contribution in
socioeconomic survey and urban census, the mission gave emphasis to women for its poverty
reduction activities. Hence Kudumbashree visualized a women- focused development model by
providing the women, an opportunity to get involved in planning, managing and monitoring of
development programmes. The masterminds of this concept have kept in mind to reach to the
men through women. The working slogan of the Mission was ​to reach out the family through
women and reach out to the community through family.
A three tier-structure is set up in each local body where the lowest tier constitutes of the
Neighbourhood Groups at the grass root level. These NHGS are organized at the ward level to
form Area Development Society(ADS) which is later federated at local body level to form
Community Development Societies (CDS) . This CDS’s run as charitable societies. The model
has sown roots in 1992 through Poverty Reduction experiment in 7 wards of ​Alapuzha
Municipality, which was later implemented in ​Malappuram ​and then later to other parts of the
state. In the year 2002, it has achieved full state coverage and in 2017 it is expanded as a
National Resource Organization.
The mission has changed the perception of women and has influenced their lives,
economically, socially and politically. The mission realized that the root cause of poverty is the
deprivation of capabilities as observed by Amartya Sen. Many of the programmes was conceived
on the basis of this understanding. Hence efforts were carried out to increase the capabilities of
poor women. Orientation was given to the poor women on their entitlements. They were trained to
access their welfare benefits and also to take responsibilities for various programmes. In addition,
they were transformed to earners. Thus the development was made people driven. It is managed
exclusively by the people with the power of a civil society organization. This has helped in the
effective channelizing of the internal and external resources. CDS functions as an effective link
between the community and government, assuming the role of a catalyst and at all levels. This
CBO structure was given an important role in development planning process as well. The system
interacts with the bank and bankers committee at different levels, starting from the CDS to state
level. The issues of repayment, additional support requirements from the bank and other banking
concerns are being raised in these levels.
While joining the group, all members are advised to take a bank account. About 99 % of
the members have opened the account in their own name itself. As the part of their association
with ​kudumbashree, t​ he women started involved in income generation and wage earning
​ hese wages were received in their accounts only. The integration of Kudumbashree
activities. T
with National Rural Employment Guarantee Scheme made the women to get enrolled as workers
under the scheme. In the scheme it is necessary to the workers to have an account to receive
wages. The welfare entitlements of many scheme were also transferred directly through
accounts.The women has also started using these accounts on a regular basis. They use it and
started withdrawing money for household expenditure, educational needs of the children and for
other expenditures. As officials confirms, about 96 % of the members also are using ATM
services. An official in the state office remarks that kudumbashree also made these women going
to the public places, markets, accessing banks and other government offices. He said “About 55
% of women started accessing bank where as 60 % is accessing government offices. During the
inception of the programme, it was meager 5% to 10 %.”
Microfinance was the basic thrust of the Kudumbashree since its inception. These three
tier societies enabled the unreached poor to have their own savings and to avail easy and cost
effective credit facilities. In the regular weekly NHG meeting, fixed savings are collected and the
amount is decided by the group members after considering the affordability of the poorest
member in the group. The savings are to be deposited in the group’s bank account on the
immediate day itself. On a rotation basis, the responsibility to attend bank is also shared among
the members. This is purposefully so as to give each member an opportunity to learn banking
procedures, varied financial products and modalities to approach for different financial services.
The savings are also utilized for internal lending and the repayment is ensured in the weekly
meetings. This repayment amount is also decided by the group members. The system follows a
participatory process that the amount of loan and the priority of disbursement are decided by the
NHG. If a member fails to repay consecutively, other members may interfere. Thus peer pressure
was a motivating factor for these women to have correct repayments.
The groups are also linked to the bank. National Bank for Agriculture and Rural
Development (NABARD), the apex institution in the country for SHG-Bank linkage among MFIs
has developed a 15 point index for rating the NHGS. Based on the rating received, the group is
linked to various banks under the bank linkage scheme. This scheme provides the group easy
access to bank loans without any physical collateral. About 186682 NHGs in the state have
received 934400 lakhs under bank linkage scheme. Matching grand is also provided to the
groups to come forward for bank linkage. Under matching grant scheme, an NHG receives a
grant of Rs.5000 or 10 % of their savings. In the state, about 103056 NHGs have received about
4057.2 lakhs under this scheme. An interest subvention scheme is also there wherein all NHGs
can avail loans as much as the demand and up to the maximum of Rs.300000/- and they will
receive an interest subvention with an interest rate of 4% Thus these thrift societies acts as
informal banks which facilitate the access to credit at a lower interest rate. The thrift societies may
substitute the informal money lenders and sometimes even the private MFIs among the poor. It is
learnt that the association with the group has increased confidence and self esteem of the
members. Many of the members have membership in other religious or community based
microfinance programme. Respecting the individuality of members, kudumbashree ​does not
control those memberships.
The system also ensures transparency and accountability even from the grassroots level.
Enough registers are maintained. In addition, Kudumbashree has promoted an enterprise for this.
Kudumbashree Accounts and Audit Service Society is formed with the commerce graduates and
they are guided by a professional chartered accountant. This team is facilitating accounts
management at NHGS, ADS and CDS levels. Kudumbashree has a common bye-law, which is a
government order. As per this bye-law, KAASS audit is compulsory.
The group members were also provided facilitation trainings to increase their capabilities.
To facilitate continuous learning of the members, financial literacy programmes are also
organized which equips them with the banking modalities, essentials of family budgeting and the
need to control over borrowing. In addition, an annual financial literacy campaign is organized for
​ arliament of c​ hildren).
the benefit of NHG members and balasabha​ (p
Beyond Microfinance, many groups are engaged in many model entrepreneurship
programmes and able to sustain. Kudumbashree members are also motivated to venture into
livelihood activities and micro enterprises. Other funds such as technology, innovation and
revolving funds are also available for the members to start innovative micro enterprises. Many
groups have marked their entry to the modern service sector as the part of enterprise activities.
Some of the good examples are parking management at different railway stations in the state and
Human Resource Service to the operation departments of Kochi Metro Stations.
 Kudumbashree has joined hands with Life Insurance Corporation of India to provide the
kudumbashree members the support of insurance scheme. This scheme is managed with the
support from state and central governments. The scheme provides insurance protection till the
age of 75 with an annual premium of Rs.250. The scheme benefits are as follows:

Benefit Ages in years

18- 50 51-59 60-65 66-70 71-75

Natural Death 2,00,000 50,000 9,000 6,000 4,000

Accidental Death 4,00,000 50,000 9,000 6,000 4,000

Permanent 2,00,000 - - - -
Disability

Partial Disability 1,00,000 - - - -

The scheme also provides education scholarship for the members of age between 18-50
years. An annual Scholarship (received in two installments) of Rs.1200 shall be availed by
maximum of two children studying from 9th standard to 12th standard. Credit Linked Insurance
scheme is also provided to minimize the risk of loan default of NHG group due to the unforeseen
events like critical illness, death or loss of property. The health Insurance needs of the members
are taken care through ​Rashtriya Swastiya Bima Yojana(RSBY) and Comprehensive Health
Insurance Scheme, the schemes of centre and state governments for the benefit of Below Poverty
Line members. A good number of kudumbashree members are enrolled in these schemes as well.
Of late, State Poverty Eradication Mission is planning to introduce micro planning. In this,
the expenses and earnings of each house will be calculated and on the basis, the financial plan for
an area will be developed using the three tier structure. The over borrowing may create troubles
for people and in those situations microfinance may have adverse effects. One such incident
happened in Andhra Pradesh state of India where many farmer members of microfinance schemes
committed suicide because of the inability for repayment of loans. As a measure to address the
similar issues, micro planning is being introduced. This model encourages the households to use
public services to reduce expenditure. If implemented, this model has huge potential for state’s
economic development.
Started as a mission, the programme became success and has developed as an
organization. The microfinance programme of Kudumbashree has helped the women for the
definite improvement in the position of household, community and society at large. For many
members, ​kudmbashree is the source of credit for the immediate capital requirement. Since they
received continued access to credit facilities, they are able to experiment new and improved
livelihood practices and is able to get diversified from subsistence agriculture practices. They have
equipped better financial management skills and also have received an increased role in decision
making in families and communities. They have started raising voices for themselves and for
others as well. They are well aware of their rights, especially of reproductive rights. Officials shared
that there are many cases where these women started raising voices against domestic violence
issues and the issues normally get solved at the CDS level. As the impact of kudumbashree, the
members are able to uplifting the quality of life which is very much evident in the transformation of
many members from meager wage labourers to a self employed person. We can see that the
association with kudumbashree has brought some social impacts as well.
The microfinance programme faces some challenges as well. One of the main challenges
at present is to introduce digital financing without any risk and to lower the non productive
expenditure, especially from the loan amount of members. Another challenge is managing the
private competitors. The private microfinance companies may provide higher loans and many
companies are not strict with borrowing ceiling. Hence managing the capital for the immediate
credit requirements of the people, controlling borrowing of the people from different sources and
reducing the lending for non productive purposes are some challenges faced by the organization.
However Kudumbashree has achieved a remarkable stake as a sustainable MFI, both in
the state and at national and international levels. It has received various national and international
awards for the efficiency of the programme. It has received UN Habitat - 2002 Practices Global
100 List, One among the 15 Best Practices in India by UNDP in 2002, UNCHS -100 Best
Innovations in 1998 and Prime Minister's Award for Excellence in Public Administration in 2007.
Very recently in 2017, the system received best performance award as National Resource
Organization (NRO).

Case 2: ​Welfare Services Ernakulam – Sahurdaya ; a church based Non Governmental

Organization in Ernakulam District
 Welfare Services Ernakulam – Sahurdaya​ Key Facts

SHG’s Formed till now 6500

Micro Credit Groups – Sahurdaya 31

Kshema Sanghamam

Families covered 70000

Thrift Collection 4008 Cr.

Loan disbursed 42.01 Cr.

Neighbour Hood Groups linked 49235

Linkage amount 200669

Matching Grant 103056

Matching amount 4057.2

Welfare Services Ernakulam (WSE) is the initiative of the Catholic Archdiocese of

Ernakulam–Angamaly ​. A Self Help Group model microcredit initiative named WESCO Credit was
launched in 2001. The main activities are the formation of SHGS, Microcredit, Entrepreneurship
and leadership Development programmes. Since its inception, financial inclusion was considered
as the core working area. The services are given to the poor families. Though women are given
preference, males can also join the Self Help Group programme. There will be a maximum of 20
members in a group. A membership fees is charged and a joint account with Sahurdaya is opened,
. Management says that majority of the members have and they use bank accounts on a regular
basis. Weekly savings is promoted which is provided among the group members as loan. Leaders
are elected and it is the responsibilities of the leaders to properly document the financial
transaction and present in the group. Weekly collections should be either deposited in the bank or
Sahurdaya Kshema Sangham, ​the zonal group. As per the group discretion, loans from financial
institution or government can be availed for the economic benefit of the group members.
Sometimes loan mela’s​ (loan disbursal drive)are also arranged. The requirements of the group
members should be discussed in the group. At the time of immediate needs, loans can be availed
with the support of the secretary or the treasurer of the group, which should be discussed in the
immediate meeting. Member should repay the loans availed in the required intervals. Any issues of
repayment may attract corrective measures such as added interest, compulsory repayment from
the member’s savings. In the case of loans availed from other institutions, the repayment is
according to the said institutional policy. It is also shared that many members have stopped taking
money from the informal lenders after their association with the NGO.
On the apex level, there is a zonal group called Sahurdaya Kshema Sangham (SKS) and
this zonal group follows a democratic process in banking. This is called as “a bank at your
courtyard”. Activities of ​Sahurdaya Kshema Sangam the Zonal Microcredit group are group
strengthening classes, monitoring visits, annual auditing and leadership developmental
programmes. Savings is collected from the group members and credit facility is given to the
members, based on savings. Thus a member will the attached to a self Help Group and to a larger
zonal group as well. A weekly savings programme is promoted and for this, the field supporters of
the sangham visits the membership houses on a weekly basis and this amount can be provided to
the members in time of emergencies. During the initial phases of joining the group, a member is
included in the activities such as promotion of savings and imparted trainings on health, hygiene
and personality. A member can avail loan for family welfare activities after having continued
savings for about six months. Loans from financial and institutions can also be provided.
Guarantee should be provided for loan exceeding savings. An interest of 12 % and 3 % of service
charge is levied for these loans. After the maturity of membership, the loan for family welfare
activities can also be availed.

Case 3: Evangelical Social Action Forum (ESAF)- Small Finance Bank

​ ey Facts
ESAF K

Borrowers 879928

Borrower per branch 4019

Portfolio 2402.09 Cr.

Portfolio per branch 8.20

 Branches 284

Groups 81179

States covered 10

District Covered 93

Loan Products Income Generation Loan, Income Generation

Loan Co-operative Members, Income
Generation Loan Special, General
Loan, General Loan Special (Products), Micro
Entrepreneurship Loan (MEL) –
Individual, Vidhya Jyothi Loan, Sanitation Loan
and Home Improvement Loan.

ESAF was formed in late 1990s as a solution for unemployment among the youth. Inspired by the
Nobel Laureate, Muhammed Yunus, ESAF was started ESAF in 1992 and had set up the
micro-enterprise development agency in 1995. ESAF Microfinance is one of the leading
microfinance institutions in Kerala and has recently transformed to a small finance bank. Being a
microfinance organization, ESAF was focusing on the holistic transformation of the people. Now
the transformation has helped us to provide additional services. Now we are able to provide
additional innovative services such as savings, housing loans, personal loans and insurance" Said
an official. This transformation is definitely an opportunity for ESAF to support people for
comprehensive development.
Originally the organization was developed as a platform for young men and women who are
unemployed. Due focus was given to women. Initially the programme started with career
counseling and small loan facilities to women so that they can start some self employment
initiatives. Money lenders were the only sources of credit for them. Poverty, backwardness and
unemployment were the challenges faced by these women. The founders of ESAF believed that if
given opportunity, these women can contribute well to the local economy. About this time, Mr.
Paul, the founder of ESAF got a chance to meet Prof. Yunus and studied Joint Liability System of
lending, introduced in Bangladesh. This microfinance model was replicated in India among low
Income Groups an ESAF social business model with triple bottom line approach. The People,
Profit and Planet were considered as three important pillars. This model perceived by ESAF was
customer centric. Community ownership, more percentage of female field staff, integrated
approach etc. are some of the peculiar features of ESAF. Recently this venture is converted as a
small finance bank.
The branches are opened majorly in less competitive areas, where the poor have the
limited service of other microfinance programmes or less penetration of financial institutions.
Before venturing into the programme in a geographical area, the profile of the location is
thoroughly studied. At first the assistant unit manager, unit manager and relationship manager
identify new areas and studies the same. They will conduct follow meetings in the community and
conduct orientation on the joint liability system. Then the branch managers go to site and explain in
detail the rules and regulation. Random house visits are also carried out. Then the area managers
approve the process and take the details of the group. The respective branch will call the members
to the bank for the further process. A normal savings account with ESAF is also opened and they
are provided ATM cards. The management ensures that these accounts are operative. They are
also encouraged for savings.
Provision of Credit Plus services was given due focus. Along with the lending, the women
were also supported with the basic facilities such as education, health, water and Sanitation. ESAF
has microfinance products addressing these requirements. ESAF believes in sustainable
development activities. The managers were given target for social activities such as reaching out to
the poor with health programmes.
It was seen that the work participation rate of women has increased. When women take
loan, they felt the responsibility to repay. This might have motivated many to start income
opportunities at their own. They started taking responsibilities and taking job in different sectors.
Microenterprises were also started for additional income so that loan repayments can be made
without stress.
ESAF also conducts financial literacy trainings. Reserve Bank of India’s module is
customized for this purpose. The women were taught the essentials such as responsible
borrowing, effective utilization of loans for productive purposes, making judgments on inflows and
outflows, preparing monthly budget and asset creation. They were also provided the basic
awareness on insurance and pensions.
The ESAF management shares that the results of their intervention is the success in
inculcating among the poor, the concept of responsible banking. They were also able to carry out
women empowerment activities and as a result women started enjoying more respect in the
society.
 ESAF Microfinance has won the Inclusive Finance India Award 2016, established by
Access ​Assist ​to honor individuals and institutions who have contributed to the growth of
microfinance ​sector. Along with, K. Paul Thomas was honored by AMCOS for excellence in
Financial Inclusion In 2017 by Association of Multi-state Co-operative Societies (AMCOS), for his
glorious contributions to the Co-operative Sector and financial inclusion activities.

2.2. Analysis

The study was conducted to understand the contribution of microfinance programme to

promote financial inclusion. Based on the case studies, a thematic content analysis (both within
and across the case) of the three models is carried out based on the Global Partnership for
Financial Inclusion (GPFI)G20 Indicators for financial Inclusion. The indicators applicable to
individuals were taken and assessed the activities of the organization. i.e. the capacity of the
programmes of organization to support individuals to achieve progress on those individual
parameters were assessed. The details can be summarized as follows:

Indicator Kudumbashree Sahurdaya ESAF

Focus of the People driven participatory, Welfare based People centric. Triple
Approach women are the only members approach, Though bottom approach. People
women are not the profit and planet are
only members, they important.
are given focus

Promotion of Every member is advised to take Members have Every member has an
Formal bank accounts. Most of the accounts. account and an ATM card.
Banking accounts are taken in their own
names

Usage of Many members use this account Accounts are in use, The accounts are used on
Bank for regular use. Many use this for on regular basis. a regular basis.
accounts receive wages and manage
household expenditure. ATMs
are also used

Savings Weekly savings are collected, Weekly savings Savings promoted by the
which is affordable to members. collected. management. Income
Coordinators ensure
 Income generation activities are responsible savings. generation activities are
also promoted. Income generation also promoted.
activities are also
promoted.

Borrowings Credit facilities are availed to Capital is provided to Responsible borrowing is

members through various the members based promoted. Group lending
schemes. Group lending model on the saving model exists.
exists and members encouraged capacity. Different
to carry out responsible credit products
borrowing catering to the
individual needs are
also available.

Repayment Weekly loan repayment is Repayments are System ensures weekly

ensured. Peer monitoring makes ensured in the repayment.
the system effective weekly meetings.
Corrective measures
are taken in the case
of failure.

Insurance to Life insurance, credit insurance, No specific coverage No specific coverage to

the members health insurance and educational to the members the members
scholarship (children of
members) are provided through
various schemes.

Digital No initiatives started so far No initiatives started No initiatives started so

Banking so far far

Financial Financial literacy programme is Regular trainings Member sensitized on

Literacy arranged. Members learn programmes are financial discipline.
banking modalities, budgeting, given. The danger of Reserve Bank of India’s
financial discipline management the over borrowing, module is customized for
etc. budgeting and financial literacy
banking modalities programmes.
etc are shared to the
members.

Financial To many members, Many members Varied credit plus sources

Behaviour kudumbashree is the immediate depend for are available.
(contribution credit source. Many has stopped immediate credit
as an taking money from informal requirement. Many
immediate lenders stopped loan from
credit source) informal bankers.
 Table 1: Case Analysis of Financial Inclusion Indicators

On the basis of the above, it is understood that these three models have programmes, to ensure
the access of bank accounts, usage of bank accounts, regular savings, availability of credit
facilities, financial literacy and controlled financial behavior. These are the features we can see
in common. Referring to the Global Partnership for Financial Inclusion.(n.d). The progress in
parameters such as access and usage of banking services, high frequency of accounts use
regular deposits, accessing credit facilities, ensuring repayment, financial knowledge and good
financial behavior can help a person to become financially inclusive. So Reading the summary
based on this, we can say that microfinance programmes have the potential to guide people to
financial inclusiveness. This can be better illustrated with the help of a diagramme.

Figure 1: Thematic Content Analysis Summary of Financial Inclusion Indicators

The major and significant learning of the microfinance programme in Kerala is the
co-existence government controlled civil society organizations, religious bodies and private entities.
They all contribute and go along with each other for the common objective. An upper hand of the
government, at least in the initial phase or a partnership with government can support the
sustainability of the initiative. Mobilizing the community through civil society organization for
accessing various public welfare schemes have also proved successful. All of these factors have
helped the women in the state to achieve empowerment. Reading along with the words of Amartya
Sen, It is essential to understand the “functioning” and “capabilities to carry out functioning”.
(Robeyns (2003). Many a times, people are not able to perform functions due to the deprivation of
capabilities and based on this understanding, the microfinance institutions under study have
planned the activities. For example, Kudumbashree ​understands poverty as deprivation of
capabilities. Hence initiatives were planned in the scheme to increase their capabilities and effort
was proved successful. Similarly, ESAF was conceptualized to the increase the capacities of
women to address the income needs. Thus the loans were disbursed to women so that they feel
responsible to repay and this will motivate women to start initiatives for acquiring the ability to
repay.
On the basis of the above inferences, it can be concluded that microfinance programme
addresses the concerns of women empowerment and poverty alleviation in a well accepted
manner. The major barriers for financial inclusion generally are geographical constraints, poor
financial literacy, lack of documents, higher minimum balance requirement and lack financial
products suiting to the needs of diversified customers. The representatives of the organizations,
covered in this study , shared that many women have started accessing various financial services
as the result of support from microfinance institutions As Ajith et.al (2006) observes, the availability
of credit facilities through microfinance has helped the women to expand the borrowing capacities.
Many microfinance institutions through their varied financial services encourage women to have
additional incomes. Many programmes promote sustainable micro enterprises for securing women
an additional income. Example: Kudumbashree Mission Impacts includes the increase in the
income of women and subsequent economic freedom achieved by the women, the greater say in
the family’s financial management, the increased household income and the ability of family to
meet various welfare activities and the wider access to the market , banks, public offices and other
different information sources . Microfinance activities have also supported the women to play
increased social and political role. Hence it can be concluded that the association with
microfinance organizations, whether it is managed by state CBO, NGO or any other model, it gives
women an opportunity to develope their capabilities. Thus they are guided towards financial
inclusiveness, which may result in their empowerment in other areas too. Kudumbashree
programme here deserves special applause. It has proved that along with economic
empowerment, women in the state have shown progress in socio political areas too. This has
fetched them more power and influence in the society and as a result the inequality rate is also
being reduced. The women in the state are in the journey to achieve financial inclusion.
Introduction of the digital banking among the poorest can be another milestone which the state can
look for. To materialize this, partnership in the areas of technology, banking and management
(logistics) has to be promoted
Accordingly it is proved that the financial capabilities of women have improved as result of
the interventions of CSO’s through microfinance programme. Quality financial services are
provided to them through these CSO’s and their improved capabilities are of great help to them to
have access and use those financial services. CSO’s work are majorly focused to achieve the
members the access to formal banking, regular savings, reliable credit facilities and to impart
financial education among them. . The journey towards financial inclusion will undoubtedly place
India in a better achievement of fifth Sustainable Development Goal. This model is to be
disseminated to the other parts of the world as well.

3. Sharing the leanings: Taking the best practices to other Countries in Asia and Pacific

As far as the empowerment of women is concerned, financial Inclusion has a greater influence and
the women in Asia may need special support to achieve this. Though the efforts for the same are
progressing, the region faces many challenges to address. Consultative Group to Assist
Poor.(n.d).shares that East Asia and Pacific constitutes one fourth of the world’s poorest
population and they are one fourth of the worlds unbanked adults. Improved access to financial
services accelerates financial inclusion. The 2014 Global Findex database shares that the regional
assessment of the account ownership in the region highlights the account penetration of adult
women as 49.3 % . Looking on the picture of Asia and Pacific countries, financial systems are
expanding the horizon. As Asian Development bank.(n.d.).shares that the investment is increasing
in the areas of savings, credit, insurance and retirement. The challenge is to provide people these
products at an affordable manner, especially to the poor and disadvantaged groups.
Though the financial inclusion efforts in the region started in the 1950’s, it was only after
2005 that the region started experiencing the effects. In India, efforts for empowering the rural poor
were considered as one of the strategies to address the financial inclusion challenges and were
proved effective among women. Access to financial infrastructure is a key concern in the region.
Significant progress can be visible in countries such as the Philippines and Indonesia. Limited use
of technological infrastructure could be one reason for the women to remain unbanked. However,
microfinance is an innovative strategy to address the financial inclusion concerns of women and
other poorest segments. Mayoux (2000) views that micro finance supports women in managing the
structural and economic disadvantages faced. It helps them to get access to the financial services
and thus leads them to financial inclusion. The market structure of the micro finance in the Asian
region varies across the countries. The level of economic development, the financial development
stage and the policy environment determines the success of the programme. In Asia, the growth of
micro finance has lead to the increase in financial inclusion especially among the disadvantaged
groups. World Bank (2006) further supports this. The region faces challenges to ensure effective
and wider access to the microfinance. The SHG model implemented in India is widely accepted
across the region. Hence it is necessary to think how the learning can be implemented in different
nations across the region.
Thus lessons from the Kerala state of India provide valuable contribution of Civil Society
Organizations (CSO) to increase financial inclusion of women through microfinance activities. The
CSO's worked on the needs of people to have a sustained income. The learning developed from
the Kerala model to replicate in other countries can be summarized as follows:
Women are the effective channels of development. Opening up opportunities for women will lead
to the development of self, household, society and community. Only people focused development
can be sustainable. When women are brought to be financially inclusive and given opportunities to
increase their capabilities and financial independence, they can bring solution to many present day
concerns of society, social, economic and political. When they are brought under Self Help Group
network, it creates more opportunities for them to work together. This was the success of
​ he system has brought all poor women across the state under an SHG network
Kudumbashree. T
and made them responsible for implementing different welfare schemes. This can be applied in
any developing country where there is a demand for community mobilization.
The present study shares the success of the microfinance to promote the financial inclusion
of women in the Kerala state of India. In the three programmes under the present study it was
revealed that the microfinance activities cater to the financial needs of the poor and through micro
finance programmes only, many women got their firsthand experience on banking. The contribution
of ​Kudumbashree has to be specially noted in this regard. Analyzing the need to replicate the
programme in other Asian countries, PricewaterhouseCoopers (2017) shares that the microfinance
sector have made remarkable contributions in some of the Asian countries including Philippines,
Vietnam, Bangladesh and Srilanka. The study remarks that microfinance industry is mature in
some of the Asian countries such as Bangladesh, India, Philippines and Indonesia. In other Asian
countries such as China, Myanmar, Russia and Laos, the microfinance sector is in the establishing
phase.
Islam (2016) shares that intensifying the microfinance activities so as to reach to the
poorest and excluded group has found productive to increase financial inclusion. He shares good
models existing in the Asia Pacific region. Special reference was made to the initiatives in India,
Pakistan, Afghanistan, China, Malaysia, Indonesia, and Cambodia. These countries are using
microfinance as an effective tool. The micro enterprise programmes and the credit facilities offered
by the microfinance institutions were the only institutional credit facility accessible to the poor. We
came across a similar observation that microfinance initiatives in Kerala too. The Micro Finance
Institutions have provided many unbanked especially women, the opportunity to access financial
services. This can be promoted as a good model across the countries in the region.
Many studies in the region highlights that the major barriers for financial inclusion in the
region are geographical constraints, poor financial literacy, lack of documents, higher minimum
balance requirement and lack financial products suiting to the needs of diversified customers. India
has achieved remarkable progress in this regard. The Civil Society Organization in Kerala also
helps the poor women with the supply of these financial services even in the remote areas. ESAF,
a micro finance provides its members a savings account and also a debit card whereas
Kudumbashree ​closely work with bank and support its members to open accounts and members
receives special considerations in following some mandatory requirements. Many women in the
state started accessing various financial services as the result of their interventions. In Bangladesh
too, we can see similar initiatives. Bangladesh Bank conducts financial literacy programmes for
adults and school going children.
Looking on the strategies of India, financial literacy is an important component. It has the
potential for ensuring sustainability. When planning financial inclusion activities. It is highly
essential to give the community, the continued education services. All the three models in the
study shares success in this regard. Reserve Bank of India has started taking systematic efforts in
this direction. Reserve Bank carries out it's financial literacy programmes through it's technical
steering group dedicated to financial inclusion and financial literacy. A number of financial literacy
centers were set up across the country and financial literacy materials were also prepared. Many
micro finance institutions in the country are working in close association with Reserve Bank of India
to improve the financial literacy of the excluded people, following the Reserve Bank of India's
guidelines. In Kerala also, micro finance institutions have played a pivotal role in conducting
financial literacy programmes.
 Group model lending was identified among the groups in the present research. This is
adopted by most of the MFI’s in India. Though loans are availed by individuals, group as a whole is
held responsible for the repayment. Shankar (2013) refers to the various success factors of MFI’s
in India. They provide financial services and products tailored to the requirement of the needy and
the services are offered in places where there is inadequate availability of banking services.
Another remarkable feature is that they provide loans without any collateral requirements and the
delivery of financial services are ensured, according to the convenience of customers. Many MFI’s
have a field officer and they supervise the activities. In ​Kudumbashree Model of Kerala, we can
see microfinance programme is being implemented without any supervision. The community itself
takes responsibility. After initial orientation, the community member themselves are selected as
leaders and these leaders facilitates various activities. The group as a whole takes responsibility
for the smooth functioning of the programme activities.
World Savings Banks Institute (2009) shares that the Self Help Group Movement has
helped the poor women in India, especially those in rural areas to have a sustainable access to the
services such as savings, microcredit and micro insurance. As an innovative stratgey, National
Bank for Agriculture and Rural Development (NABARD) promotes microfinance through SHG
–bank linkage model to make the bank loans accessible to SHGs. The growth of NGO- MFI’ s have
also contributed to the increased outreach of microfinance services. The present study came
across an interesting finding that a good proportion of ​Kudumbashree ​ groups also make better
use of the services of SHG-bank linkage programme. Similar initiatives are being promoted in
Nepal as pointed out by World Savings Banks Institute (2009). The regional development banks ,
NGO- MFI’s and cooperatives in Kathmandu valley delivers the microfinance services.
Kudumbashree was able to promote micro insurance to its members as in Bangladesh, where
micro insurance was introduced as an extension to other microfinance services.
The coexistence of different types of civil society organizations can also create wonders.
The state’s support can accelerate the rate of development. Along with coexistence, partnership
also works well. Effective partnership can also create good results, the state with power for policy
changes and financial access and a CSO with good human resource can work together. Thus the
state can facilitate the performance of the grassroots organizations.
World Bank (2004) shares that there are global success stories which depicts the
transformation of microfinance programmes and NGO's to a financially sustained bank with
license. Association of Cambodian Local Economic Development Agencies is a good example.
The study also came across similar experiences ​as in the case of ESAF in the present study.
 Originally ESAF was an NGO, which is now a small bank catering to the different needs of poor
women. The small bank has unique products specially designed with proper consideration of the
different needs of people. Some officials of the bank are in the view that the bank status has
improved the performance as a microfinance institution. This may be applicable to other countries
as well.
Thus the CSO initiated model of microfinance discussed here has huge potential for
financial inclusion, not just in the state. Regional cross country learning can stimulate the global
performance in sustainable development goal of reducing gender inequality. Studying the success
of the group based on microfinance and contribution of the programme for accelerating financial
inclusion, it is evident that this model can be replicated in other countries in the region. Countries
like Bangladesh, Philippines provides good examples. While replicating, we need to consider the
socio political and economic scenario of the country as well. The thrust of the programme in Kerala
is the decentralized microfinance management. Groups are formed at the grassroots level and the
monitoring of the programme is ensured through the empowered community leaders with the
support of the officials at the block, district, and state level. The linkage of groups with the banks
and other development schemes provided women increased opportunities. To replicate this model
in other Asian countries, we have to seriously consider these factors. Civil Society Organization
and its leaders need to be empowered and they should get access to different resources; financial,
social and political. It is also learned, that a minimal regulation from the part of the government and
increased creativity space for the Civil Society Organizations can accelerate success while
reproducing this model. Government need not interfere in the regular day to day management,
rather a minimized regulation and monitoring support is advisable. However, no doubt microfinance
activities can stimulate the performance of women’s financial inclusion in the region, if managed
with the utmost care. Thus Asian region will exhibit increased progress in achieving the fifth goal of
Sustainable Development Goal addressing the concerns of women empowerment.

4​. Suggestions and Recommendations; Role of Government, Civil Society Organizations

and International Organizations

4.1. Recommendations for State/ Government:

Microfinance can surely enhance the capacities of people across the world and is acknowledged
as a legitimate financial activity reaching to the poor and excluded groups Different best practices
across the world suggest that there should be a continuous dialogue and increased participation
between the State, Civil Society Organizations and International Development Organizations.
As a protector, ​the state can set proper regulations for creating an environment conducive
for the promotion of financial inclusion. It should motivate the institutions to have responsible and
people friendly business and at the same time, special protection for women and other vulnerable
groups has to be ensured. Consultative Group to Assist the Poor.(20004) remarks that the major
contribution of the government to microfinance sector is to maintain macroeconomic stability
through appropriate monetary and fiscal policies. India provides an example of the regulation in the
sector. When microfinance sector grew and started influencing people, Government of India has
formulated a regulation titled “Micro-financial Sector (Development and Regulation) Bill, 2007. This
bill gives National Bank for Agriculture and Rural Development, the role of a regulator and provides
registration of all microfinance organizations offering thrift services. The story of Andhra Pradesh
further states the need for regulation. Microfinance was a success in the state and because of the
high-interest rate and the associated overburden of credit, a number of farmers committed suicide
and the state government enacted a legislation named “The Andhra Pradesh Micro Finance
Institutions (Regulation of Money Lending) Act, 2010” which specifies the compulsory registration
of Micro Finance Institutions and its activities such as the disclosure of effective interest rates,
ceiling on interest rates and penalties for coercive recovery measures.
Though regulations are inevitable, it should not hamper innovation and development. The
role of the government should be of a facilitator and a supervisor. Interest ceilings from the part of
the government may force many MFI’s to withdraw from the sector which eventually leads to
unavailability of the credit facilities. Hence the government should not intervene in credit delivery.
Rather, the presence should be in the form of well managed consumer protection laws. It is
recommended that these laws shall include non prudential regulations, disclosure of loan costs,
grievance redressal procedures and consumer education. This can foster more competition which
can eventually lead to lower interest rates as well.
By playing the role of a promoter, government also needs to ensure the maintenance of
infrastructure and a healthy financial system. The promotion of zero balance bank accounts among
microfinance members can stimulate the access to financial services. Further there is a need to
ensure the fund availability to the microfinance institutions and capital access to the customers.
The banks should be encouraged to provide credit to CSO’s offering credit services to the poor and
also to the SHGS. Government can also ensure th​e involvement of private sector​. The
association of private players and civil society organizations can support in the establishment and
growth of microfinance sector within the financial systems. International investments can also be
promoted. ​Fostering the interventions of CSO’s and private entities can support better
management of the microfinance programme as these units enjoy greater political
interdependence and possess good technical skills.
As implied earlier, the provider role of the government does not mean the direct delivery of
financial services. The creation of effective network can be a good task, which government can
take. Formation of an Apex organization is a welcoming move. NABARD in India and NDTF in
Srilanka give evidence for this. The further scope of government may include the promotion of
financial education services and the capacity building activities ​for ​the CSO’s. Some of the main
challenges before the government in the journey may include access to digital finance.
Incentivizing may help the growth. Planning measures for addressing failures and the promotion of
best practices also should be in the priority of government.

4.2. Recommendations for Civil Society Organizations:

Civil Society Organizations also have an important role to play as a microfinance organization to
promote financial inclusiveness among poor women. They can build effective partnership, both
with government and private entities. CSO’s should promote transparency and accountability in the
sector and as an advocate, they should work closely with women. They need to focus on raising
awareness of societal issues and challenges particular to women.
Being a service provider of microfinance, development organizations (CSO’s) should be
taking care of operational functions and should reach to the women, especially the poorest. CSO’s
can support various microfinance activities such as the promotion of Self Help Groups, Inculcating
a regular saving habit among women, facilitating credit facilities, ensuring prompt repayment and
they can even support for various income generation activities as well. The CSO’s can make use
of their expertise in working with communities. In India, they have proved their capacities for group
work, bringing out innovation, mobilizing community and creating grassroots presence. Realizing
their strength, Government of India provided them a platform to get engaged in the development
projects from seventh five year plan itself. Grameen Bank Model of microfinance was also
implemented in India with the active involvement of CSO’s. Access to financial services according
to the varied needs of women is highly inevitable as far as women are concerned. For example
women should get access to bank accounts and should be provided credit facilities to meet their
needs such as education, health and other household expenses. The monitoring of SHG’s can be
efficiently managed by CSO’s and they should also identify the excluded groups and communities
in their area of operation, if any. Follow up services to fill the gaps are also required.
Another area where CSO’s can support the financial inclusion process of women is by
providing financial advisory services to the women, especially to the poor. As an entity working at
the community level, they can identify grassroots concerns and shall help in building solutions.
They should also contribute to the development of unique knowledge and experiences. This gives
them an opportunity to pitch in to the policy and strategy development process and also for the
implementation. They can also provide feedbacks to the government as well as to the various
international agencies for the development of standards for civil society participation and also for
the engagement in international decision making processes. CSO’s could also take care of the
accurate reporting and grassroots level. They should support government and international
agencies for knowledge building activities which generally support policy alternatives, decision
making process and quality delivery of services. Technical expertise can also be delivered in
certain areas as requested by the government, especially at the time of international agreements
or any related activities. They also can be included in various national and international
delegations as well.
There is also the need to promote livelihood enhancement activities among women.
Microfinance can be source of credit in such times. CSO’s can ensure prompt repayment and
ensure the growth of the enterprises. In addition, CSO’s can give technical support for viable
enterprise activities. Some of the target population may need a longer pay back Period, CSO’s can
help them by developing appropriate solutions. They also can mobilize support from the apex
institutions through SHG- bank linkages.
Civil Society Organization’s presence is widely acknowledged as a Capacity builder. They
can provide financial education, training and other capacity building exercises to the women
accessing microfinance services. Women’s capacity development is highly inevitable for financial
inclusion and financial education is a success indicator for financial inclusion in many countries
including India. Women can be provided lessons of financial literacy essential to managing
household and personal finances, basic banking concepts, financial planning, responsible
borrowing and responsible spending. As the part of microenterprise development, they can be
provided vocational training life skills training and business management essentials. Digital
banking concept also needs to be introduced. But this has to be planned and implement in a very
systematic manner.
 As a representative, Civil Society Organizations can make representation for the population
they serve. As far as financial inclusion is concerned, the representative role is of huge importance.
This gives CSO’s a responsibility to make the financial services to the reach of all the excluded and
speak for those who lacks voice. Many women may need special support. The CSO’s can facilitate
negotiations for these people. They also need to mobilize public opinion in time of crisis and other
emergency situations. Public can be influenced through various campaign and outreach activities.
Thus the CSO’s can contribute for the representation of voiceless in the management of the
programme, which can even be helpful for the representation of the excluded in the policy making
process too.

4.3. Recommendations for International Organizations:

Enabling women for financial inclusion through microfinance is increasingly a development activity.
In this process, international organizations are also good players. Their support will strengthen the
efforts of both government and civil society organizations. As far as the financial inclusion of
women in Asia is concerned, the Asian Development Bank can play a significant role. Yet other
international organizations can also contribute. The role of international organizations shall be
focused on developing appropriate financial infrastructure, enabling capacity development,
fostering institutional development and facilitate training, research and dissemination activities
In the sector, there is a need to establish a sustainable grassroots level financial situation.
Hence appropriate local organizations capable to influence programme activities and policy
process for women need to be identified. This can be even a government organization or
department also. One of the major contributions of the international agencies lies here. They can
complement the capital of CSO’s or other private players through appropriate grants, loans, and
other temporary equity instruments or other funds. This will ultimately lead to the capacity building
of the organizations functioning at the local level. Thus the international organizations are also able
to contribute to the institutional building as well. But this support should be done strictly on the
basis of assessment. This requires a cost-benefit analysis in prior. Before supporting, the track
history of the local organization to provide quality financial services to the women and the
experiences of working with women needs to be verified properly. The support can also be
provided to the respective governments also if a particular local situation demands so. Once the
fund is provided, the flow needs to be tracked at regular intervals and needs to ensure the reach
into the results concerning financial inclusion. There should be proper systems for monitoring and
reporting. Monitoring shall be carried on a periodical basis and the relevant reports need to be
recorded.
However, the role of various international/ bilateral development organizations should be
beyond the provision of relevant funding. They should be able to sustain the markets. The
significant barriers for market development which obstructs financial services reaching women
should be identified and they shall facilitate the development of appropriate strategies at the local
level with the active role of government and CSO’s.
One of the key barriers for the local level institutions is the lack of efficient human resources
at managerial level. Hence the international organizations can help in the capacity building of the
local organizations by providing training to the staff. This will help the CSO’s to increase their
performance so as to reach to women and other excluded people, making them capable of
innovations and providing required capital to the needy.
There is an urgent need to improve the research and knowledge producing activities.
Efforts should also be taken to identify partners and to acquire supporting funding from private
institutions for research or other programme activities. Liaisoning with the academic community is
also encouraged. They can be involved in creating influence in the policy process. Research
grants shall be provided for them. It is also welcoming to identify appropriate international partners
for ensuring the effective knowledge dissemination at the international level.

Conclusion:

Gender equality is one of the goals among Sustainable Development Goals. There is an increased
attention among the government, civil society organizations and international organizations to work
for address the equality concerns faced by the women. To bring a sustainable solution to these
equality issues, it is necessary to build the capacities of women, especially the poor. Lack of
access to financial services makes the situation of poor women even worse. Financial inclusion is
accepted as an effective strategy internationally. Kerala has shown the rest of the world a good
model for this; people driven microfinance model. It is proved that microfinance contribute to the
goal of financial inclusion. There is much more to do to achieve this. The efforts should be
continued and the model has to be promoted.
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Submitted by:
Caroline C. Neriamparampil
Social Development Specialist, Pradhan Manthri Awas Yojana,
Kudumbashree Mission, Government of Kerala
Note: (Posted in Kochi City Municipal Corporation)