Academic Experts Discuss the Gendered Structure of Microfinance in Urban India, Need for Transformation and Accountability
Asia Society at Home
HOUSTON, March 7, 2022 – In partnership with the India Studies program at the University of Houston, Asia Society Texas welcomed three experts to discuss the microfinance industry in urban India, including whether it is exploiting the working-class women it intends to serve. Dr. Smitha Radhakrishnan, Professor of Sociology and Women's Studies at Wellesley College and author of the book Making Women Pay: Microfinance in Urban India, joined Dr. Elora Shehabuddin, Professor of Transnational Asian Studies and core faculty in the Center for Study of Women, Gender, and Sexuality at Rice University, in conversation with Dr. Debarati Sen, Associate Professor and Undergraduate Program Director of Anthropology at the University of Houston.
Beyond the “simple story” of microfinance
Dr. Radhakrishnan began by discussing her new book, Making Women Pay: Microfinance in Urban India, sharing that she had originally looked into how microfinance fosters entrepreneurialism or financial literacy in women borrowers and chose to focus on South India, which has the country's largest concentration of commercial microfinance. However, she said that ultimately her book became about the infrastructure of economic power and gender, revealing that the way the industry functions in urban India ends up taking advantage of women’s social and economic vulnerabilities while consolidating power for privileged men at the top.
Dr. Radhakrishnan said that many people, including her students, believe in the simple story that nonprofit microfinance, such as those offered by NGOs or government-led self-help groups, are helping lift women out of poverty. An example is Grameen Bank, a microfinance organization and community development bank in Bangladesh that has extended small loans without requiring collateral — a project that earned its founder Muhammad Yunus a Nobel Peace Prize in 2006. Dr. Shehabuddin, who studied the bank in the late 1990s, said she was excited to learn about how the bank helped social development goals, taking women beyond their traditional roles in the family and community, and about the potential for collective work. However, Dr. Shehabuddin explained that much of the development was based on rural banking and promoting development for women with rural networks, which she noted was not the case in urban India.
The growing costs of microfinance for women
Dr. Sen asked the speakers how microfinance reconfigures the relationship between state and citizen as women who were previously considered non-creditworthy are now the perfect subjects of this new financial system. In response, Dr. Radhakrishnan indicated that nonprofit microfinance is often seen as less exploitative compared to commercial microfinance but in reality there is not a clear distinction as the state is involved in all types of microfinance — and the state is, in essence, offloading responsibilities for basic rights to private companies as it becomes market-oriented. She explained that it means the state is offloading credit access — for women, especially — to financial companies.
Dr. Radhakrishnan went on to add that microfinance in South India reflects the intersections of caste, hierarchies, class, religion, and other identifiers — especially gender. She shared that microfinance lending in South Asia almost exclusively targets women compared to, for instance, Latin America, where it is more gender-balanced. This is because women are considered a safer segment, more likely to repay loans compared to men; moreover, policymakers and lenders believe women will spend the money on their families while men will spend it on themselves, reflecting certain cultural and societal beliefs. Additionally, Dr. Radhakrishnan added that men in India are seen as charismatic figures who could become financial captains, while women are not granted the same kind of attention or power. As such, men rise through the ranks of the industry, joining the organizations and accruing more systemic power, while women remain clients. So the existing gender gaps continue to grow.
While both speakers agreed that microfinance certainly provides opportunities and benefits, they also said it comes at a cost, particularly to women. Though microfinance provides credit for women where in the past there was none, it also creates debt. Dr. Shehabuddin noted that the early days of microcredit came with additional NGO activism, where a component of the loans also included having women come together for regular meetings or to start a microenterprise — providing opportunities for women to strengthen their social networks and build collective power. Now, she said, when microfinance provides simply a loan and no additional opportunities around that, it has become harder for women to come together and mobilize. Dr. Radhakrishnan added that this phenomenon is being further exacerbated as microfinance transitions to digital finance and mobile apps, which has led to the decline of in-person gatherings and engagement that could drive social development.
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Changing an institution and holding companies accountable
Dr. Sen asked the speakers what they believed the best path forward was for microcredit and microfinance in light of the conversation. Dr. Radhakrishnan said rather than to try to change the culture of South India or to abolish microfinance, the solution is to view microfinance as an institution — and to change the way the institution operates by making companies accountable to the people they serve. She emphasized the need to develop programs and services that truly serve the women they are ostensibly meant to serve.
Dr. Shehabuddin also added that while U.S. financial companies do not have significant sway over the microfinance industry in India, there is still a role for the U.S. consumers to play. She said it was important to reject “the danger of the simple story,” and to think critically about microfinance and the complicated lives of the women who take these types of loans, to look at these efforts and look at where the money goes.
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