Money & Finance

Inclusive finance for inclusive growth: A gender perspective

  • Blog Post Date 31 July, 2015
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Vigneshwara Swamy

Indian Business School, Hyderabad

While research has established that financial inclusion programmes lead to economic upliftment of poor families owing to the participation of women, the evidence on the impact of such programmes on women empowerment is mixed. Based on a household survey data in India, this column finds that female-headed households that participate in financial inclusion programmes gain more in terms of economic well-being, vis-à-vis male-headed households.

It is a widely held view that growth is good, sustained high growth is better, and sustained high growth that is inclusive is the best-case scenario. Inclusive growth can only be achieved when all the weaker sectors of the economy, including agriculture and small-scale industries, are developed and brought at par with other sectors. Equitable growth, wherein the benefits of growth are distributed across all the sections of the population, is imperative for inclusive growth so that everyone participates in the growth process.

In this context, a significant strand of literature has examined the impact of inclusive finance1 on income levels of households. Many studies have suggested that financial inclusion (FI) programmes aimed at inclusive growth have a positive impact on the income levels of the participants (Thomas 1990, Haddad et al. 1997, Rawlings and Rubio 2005, Handa and Davis 2006). It is also established that FI programmes aid in economic upliftment of poor families owing to the participation of women (Mosley 2001, Kabeer 2001, Montgomery and Weiss 2011). However, evaluations of the effects of such programmes on women´s empowerment have generated mixed results - while some believe that FI programmes can induce a process of economic, social and political empowerment for women (Kabeer 2001, Montgomery and Weiss 2011), others are more sceptical and even point to a deterioration of women´s overall well-being (Navajas et al. 2000, Mosley 2011). Based on the evidence, development scholars and practitioners have sought to distil some of the ingredients that might increase the likelihood of empowerment of women participants of FI programmes, or at least reduce adverse effects.

The mixed evidence on the impact of FI programmes on women’s empowerment, which is in contradiction to the established viewpoint that such programmes aid in economic upliftment of poor families owing to women’s participation, motivates an in-depth analysis of the issue. Drawing mainly on insights from institutional and feminist economics, I present empirical evidence from an impact study of FI programmes in different regions of India (Swamy 2014).

My study investigates the level of impact of inclusive finance on annual incomes of participating poor households that are headed by women (women manage the financial resources) vis-à-vis that of male-headed households. I also look at the impact for three broad social categories, namely, (i) General (ii) Scheduled Caste/ Scheduled Tribes (SC/ ST), and (iii) Other Backward Classes (OBC).

Financial inclusion programmes in India and women’s participation

Launched in 1992, self-help group (SHG)-Bank Linkage Programme2 (SBLP) has been a key tool for achieving FI in India. There has been steady progress under the SBLP; the total number of SHGs linked with banks was 7.46 million in March 2011.3 Of of the total number of bank-linked SHGs, those exclusively comprising women were 6 million, and amongst them 1.29 million were credit linked4. The total number of SHGs with loans outstanding as on 31 March 2011 stood at 4.78 million, of which exclusively-women SHGs were 3.98 million and covered 97 million women. Total amount of loans outstanding against SHGs as on 31 March 2011 was Rs. 312.21 billion, of which the total amount of loans outstanding against exclusively-women SHGs was Rs. 261.23 billion. Total savings amount of SHGs with banks as on 31 March 2011 was to the tune of Rs. 70.16 billion, of which the share of exclusively-women SHGs was Rs. 52.98 billion.

Another mechanism for achieving FI is basic banking ´no-frills´ accounts, with nil or very low minimum balance requirement and no charges for not maintaining such minimum balance. These were introduced as per an Reserve Bank of India (RBI) directive in 2005. By March 2012, 105.5 million no-frills accounts were opened by banks with outstanding balance of Rs. 93.3 billion.

Impact of inclusive finance on female-headed households

In order to estimate the impact of inclusive finance on poor, female-headed households in India, I analyse primary data from a sample of 1,052 households selected from all regions of the country5 . The survey was undertaken in 2012 and information was collected for 2012 and 20076 7.  Half of the sample (526 households) constituted the ‘treatment group’ (who joined the FI programme – through SBLP or no-frills bank account - before 2007) and the other half the ‘control group’ (who did not participate in the FI programme at all). In the treatment group, there were 263 female-headed households and 263 male-headed households.

I find that the rate of growth of annual income was 10.76% for female-headed households, and 6.76% for male-headed households, during the period of the study. Of this, 8.4% for female-headed households and 3.97% for male-headed households can be attributed to FI programmes in the form of microfinance and no-frills bank accounts8 9.

Amongst the three social categories analysed, we find that the general category experienced the highest rate of growth in their annual household income (10.72% for female-headed households and 5.96% for male-headed households), and the least rate of growth was experienced by SC/ STs (8.1% for female-headed households and 5.96% for male-headed households).

For the general category, the total increase in household annual income from 2007 to 2012 was 112% for both male- and female-headed households in the general category. The increase in annual income due to participation in the FI programme was 66% in the case of female-headed households. For OBCs, the total increase in annual income for female-headed households was 104%, of which 58% was due to the FI programme. For SC/ STs, the total increase in annual income for female-headed households was 76%, of which 48% was due to the FI programme. This shows that FI programmes impact very significantly on deprived sections like SC/ STs by augmenting their annual incomes. Further, it should be noted that FI programmes have a strong positive impact on the income of women participants across all the social categories.

Concluding remarks

The study shows that the impact of FI programmes leans positively towards female-headed households. The findings suggest that women possibly use resources in ways that improve family well-being and contribute to an increase in income levels of the households. This implies that gender matters in the impact of welfare programmes targeted at the poor, and this should be taken into account while shaping policies and programmes in this domain.


  1. Inclusive finance comprises an entire gamut of financial products and services that seek to provide easier access to finance to low-income households.
  2. Self help group (SHG)–Bank Linkage Programme (SBLP) aims to deliver financial services and microfinance to the poor, hard-to-reach populations. By aggregating individual savings into a single deposit, SHGs minimise banks’ transaction costs and generate significant volume of deposits. Thus, banks are able to serve small, rural depositors and pay them a market rate of interest.
  3. The data has been compiled from ‘Status Reports on Microfinance in India’ and ‘Reports on Trends and Progress of Banking in India’; RBI publications, various issues.  This means that in addition to having access to other banking services such as savings account, the SHGs had access to credit from banks.
  4. Since the inception of microfinance in India, its growth has been skewed in favour of the southern region. In FY 2011-12, south India accounts for over 50% of the total SHGs linked to banks, followed by the Eastern region (about 22%). This has been taken into account while selecting the sample for the study.
  5. Since FI through SBLP has been in vogue in India since 1992, the period of two decades of existence is more than adequate to capture the relevant aspects intended to be covered in the study. However, in order to estimate the economic impact of women participation in the FI process, which has been rigorously pursued as a policy approach through microfinance and no-frill accounts by banks since 2005,  2007-2012 was chosen as the study period.
  6. The impact is reported net of inflation.
  7. These figures are in terms of Compound Annual Growth Rate (CAGR). CAGR is the annual growth rate over a period of years, calculated on the basis that each year´s growth is compounded, that is, the amount of growth in each year is included in the following´s year´s number, which in turn grows further.
  8. Details of econometric methods used to isolate the impact of FI programmes on household incomes are in Swamy, Vighneswara (2014), “Financial Inclusion, Gender Dimension, and Economic Impact on Poor Households”, World Development, 56 (4): 1–15.

Further Reading

  • Haddad, L, J Hoddinott and H Alderman (eds.) (1997), Intrahousehold resource allocation in developing countries, John Hopkins University Press, Baltimore, MD and London.
  • Handa, Sudhanshu and Benjamin Davis (2006), “The experience of conditional cash transfers in Latin America and the Caribbean”, Development Policy Review, 24 (5): 513-536.
  • Kabeer, Naila (2001), “Conflicts over credit: Re-evaluating the empowerment potential of loans to women in rural Bangladesh”, World Development, 29(1): 63-84.
  • Montgomery, Heather and John Weiss (2011), “Can commercially oriented microfinance help meet the millennium development goals? Evidence from Pakistan”, World Development, 39(1): 87-109.
  • Mosley, Paul (2001), “Microfinance and Poverty in Bolivia”, Journal of Development Studies 37(4): 101-132. 
  • Navajas, Sergio, Mark Schreiner, Richard L Meyer, Claudio Gonzalez-Vega and Jorge Rodriguez-Meza (2000), “Microcredit and the Poorest of the Poor: Theory and Evidence from Bolivia”, World Development, 28(2): 333-346.
  • Nair, T and A Thanka (2013), ‘Microfinance India: State of the Sector Report 2013. An Access Publication’, Sage Publishers.
  • Rawlings Laura and Gloria M Rubio (2005), “Evaluating the impact of conditional cash transfer programs”, The World Bank Research Observer, 20 (1): 29-55.
  • RBI (2012), ‘Report on Trend and Progress of Banking in India 2011-12’, Reserve Bank of India.
  • Thomas, Duncan (1990), “Intra-household resource allocation: an inferential approach”, The Journal of Human Resources, 25 (4): 635-664.
  • Swamy, Vighneswara (2014), “Financial Inclusion, Gender Dimension, and Economic Impact on Poor Households”, World Development, 56 (4): 1–15.
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