Microfinance as a tool to initiate women’s empowerment

By Priya Chetty on February 24, 2012
Image by Meena Kadri on Flickr

International aid and development work related to addressing poverty often focuses on the issue of empowerment with microfinance. The world Bank (2002), defines empowerment as “the expansion of assets and abilities of poor people to participate, negotiate, influence, control and hold accountable institution that affect their lives” (p. 14).

Understanding empowerment

Although not explicitly listed, it is easy to see that empowerment, would necessarily have positive psychological consequences related to self-efficacy, dignity and other aspects of mental health. Interestingly, empowerment is an issue that is already talked about within the framework. The World Bank (2002) reports “there is a reciprocal relationship between individual assets and capabilities to act collectively. Poor people who are healthy, educated and secure can contribute more effectively to collective action. At the same time, collective action can improve their access to quality schools or health clinics” (p. 15). Despite the fact that empowerment programs undoubtedly have psychological benefits, they are most often framed in economic terms and presented as economic interventions. This is, perhaps, the reason that there has not been more attention to such programs within positive psychology itself.

Changes due to empowerment

Since the 1980s, the economic tool of microfinance has been used to combat poverty in the world. Micro finance programs provide poor women and men across the world with small loans for business startup or improvement, home improvements or other family matters. When implemented appropriately, micro financial programs have seen success in social and psychological aspects. In fact, some microfinance programs have helped women become more empowered in their household and community. Theoretically, empowerment has the potential to impact individuals in three ways:

  1. Power to
  2. Power over and
  3. Power within.

Microfinance programs have been found to impact all three of these categories for women in economically developing countries [1].

Understanding power to

Power to is a personal sense of efficacy or influence and can be used to understand the psychological benefits of the empowerment process including autonomy, self-confidence and self-esteem. Microfinance programs in Bangladesh, India, Nepal and South Africa have been found to increase these characteristics components of psychological empowerment. A study found that Nepalese women participating in a microfinance program reported higher levels of self-confidence. They had more progressive attitude towards gender norms and relations compared to South African women who did not participate.

Understanding power over

Microfinance programs have also been associated with increase in the power over components of empowerment. Power over is an individual’s ability to make personally or socially impactful actions. Studies have associated women’s participation in microfinance programs with women’s increased reports of decision-making, bargaining power and communication with their husbands as well as improvements in  relationship and appreciation.

Understanding power within

Finally, it has been suggested that microfinance programs positively impact women’s sense of power as an  ability to participate in an organisation and community. Women who participate in microfinance program  have been reported to be more active in social organisations and seek community activities. Research shows that participation in microfinance programs serves to help women gain access to resources and increase mobility which provide a stepping stone for women to enter social and political arenas [2].

Helping women empowerment with microfinance

Microfinance programs have also been criticized for a number of failures negatively impacting women’s financial, social and psychological well-being. Many critiques recognize that micro finance opportunities does not immediately alleviate poverty or empower women simply by program implementation or participation. However, it is important to recognize that, when implemented appropriately, micro finance programs can be successfully and result in positive impacts. Taking into account women’s needs, community needs and resources, microfinance programs can be tailored to fit a specific group of women. By doing so, organizations and communities increase the chances of the program’s success and enhance the potential to help women overcome poverty and find ways to empower themselves.


  1. Jones S R (2004), Legal guide to microenterprise development, American Bar Association, USA
  2. Gelb J (2009), Women and politics around the world, ABC-CLIO Inc., USA

Priya is the co-founder and Managing Partner of Project Guru, a research and analytics firm based in Gurgaon. She is responsible for the human resource planning and operations functions. Her expertise in analytics has been used in a number of service-based industries like education and financial services.

Her foundational educational is from St. Xaviers High School (Mumbai). She also holds MBA degree in Marketing and Finance from the Indian Institute of Planning and Management, Delhi (2008).

Some of the notable projects she has worked on include:

  • Using systems thinking to improve sustainability in operations: A study carried out in Malaysia in partnership with Universiti Kuala Lumpur.
  • Assessing customer satisfaction with in-house doctors of Jiva Ayurveda (a project executed for the company)
  • Predicting the potential impact of green hydrogen microgirds (A project executed for the Government of South Africa)

She is a key contributor to the in-house research platform Knowledge Tank.

She currently holds over 300 citations from her contributions to the platform.

She has also been a guest speaker at various institutes such as JIMS (Delhi), BPIT (Delhi), and SVU (Tirupati).



1 thought on “Microfinance as a tool to initiate women’s empowerment”