Socio-Economic Empowerment of Women Through Micro-Financing

Journal of Commerce & Management Thought
Vol. 7-4, 2016, pp 633-655

10.5958/0976-478X.2016.00034.3
Socio-economic Empowerment of
Women through Micro-financing :
A Study of Self Help Groups in Pune City
Dr. Rajashree Shinde, Ashwini Joshi
Abstract
Availability of sufficient funds and its easy access to poor is one of the pre-
requisite for the growth and development of any developing nation. Financial
Institutions play a great role in smooth flow of funds from savers to
borrowers. But when majority of the population is deprived of this benefit,
then it becomes a serious issue for all. This problem is on an alarming scale
in India. Even today majority of its population has no easy access to credit
from the formal sources. This shows that India has a long path ahead in
achieving the objective of complete financial inclusion of the citizens. This
indicates that there is a need of introducing some innovative idea which will
link the poor households with mainstream financial institutions. Micro-
finance is one such approach which has a potential in ‘reaching the deprived
population’. All micro- finance ventures aim at poverty alleviation, socio-
economic advancement, women empowerment and capacity building of the
downtrodden. The present study focuses on socio-economic empowerment of
women through micro enterprises with reference to Study of SHGs in Pune
city.
633
634 Journal of Commerce and Management Thought 7 - 4
Keywords : Micro Finance, Women Empowerment, Capacity

Building, Micro Enterprises.
Introduction
‘India is a rich country but it is inhabited by poor’, is an apt remark
often quoted by social scientists. What does it reflect? It means that, despite
of sufficient land, water, minerals, forests and other natural resources
including huge man power, the large chunk of its population lives below the
poverty line. Since independence, India has faced many challenges, of which,
poverty and unemployment are considered as the serious issues, primarily
because they are subsets of each other. In fact, poverty is a root cause of many
socio-economic problems and women make-up a substantial majority of the
poor. Even today, majority of the women are plagued by illiteracy, poverty
and lack of basic amenities of life. Hence, poverty alleviation should be the
main target for the nation along with empowerment of women to make it a
prosperous and developing country.
However, the series of anti-poverty programmes launched by the
government so far has got mixed success as funds did not percolate to grass
root level. Government then realized that, efforts should be made at micro
level to turn small savings into lump sums for a wide variety of uses. The
micro-finance revolution has proved to be a ray of hope for all these
problems and has become a complete kit of economic development. Hence
the present study was undertaken to find out the efficacy of SHG model in
the entrepreneurial development among women, resulting into their socio-
economic empowerment in Pune city.
Concept of Micro-finance
Micro finance is a broad concept which includes the provision of
financial services such as micro-credit, micro-saving, micro-insurance and
also non-financial services such as training and counseling. This mechanism
operates on the basis of group mechanism.
This concept was first used by Prof. Muhammad Yunus of Bangladesh.
However, the credit of making this concept popular and successful in India
goes to NABARD and RBI.
Socio-economic Empowerment of... 635
There are two most prominent modes of delivering micro-finance in India.

1. SHG – Bank – Linkage Model.
2. ILG – Model followed by NBFC-MFIs.
Out of these two, the researcher has focused her attention on the SHG
model.
Self Help Group (SHG)
SHG is an informal association of individuals, preferably the
disadvantaged members, who come together voluntarily for the promotion of
economic and social objectives. As per the decision of the group, each
member saves a fixed sum of money every month, which is deposited in the
bank in the name of that SHG. From this common fund then loans are given
to the needy members with the unanimous decision of the group for their
productive and emergent credit needs. Thus, SHG is a saving-led model.
In the process of development, members learn the basics of accounts
keeping and also imbibe the essentials of financial intermediations. Within a
period of around six months, the group gets stabilized and shows matured
financial behavior. Thereafter, they approach banks for more sizeable loans.
Such an SHG is effectively 'linked' to the banks and thereby to the
mainstream credit market of the economy. The loans are given without
collateral, as the peer pressure ensures timely repayment of loan.
SHG-Bank Linkage (SBL) Model
The SBL model is home grown model of micro-financing in India. This
was conceptualized and initiated by NABARD in 1992 through the linkage
of existing SHGs with banks. This process was speeded up with the
permission of RBI in opening of bank accounts in the name of SHGs. The
group members approach the bank for taking loans for business purposes.
Bank then gives loans to whole group without physical collateral. The group
is jointly liable for the repayment of loan. In this way, the SHG-Bank-
Linkage Model works.
Developmental Scenario of Pune city
Pune, with more than a hundred educational institutes has rightly
acquired a reputation as `The Oxford of the East’. It is the second largest

metropolitan city in Maharashtra and has emerged as a prominent location for
IT and manufacturing companies.
However, PMC’s Environment Status Report shows that, even today,
nearly 40% of the total population lives in slum areas. There are around 477
slum pockets in the city, lying on just 2.34% of total land area. The analysis
of the growth of slums in Pune reveals that annual growth rate of slums (6.06)
is higher than annual growth rate of city (4.14). It is also observed that, the
density of the slums is about 6 times that of the overall density prevailing in
the rest of the city.
This is an alarming situation which needs immediate attention of the
Local Government. Accordingly, PMC is trying its best for the overall
progress and development of its citizens. The two departments of PMC, `The
Slum Improvement Department’ and `Urban Community Development
Department’ are taking great efforts in changing this scenario. However, the
researcher has focused her study on the working of UCD Department only.
In order to implement its development schemes, PMC has established a
separate department called as Urban Community Development Department
in 1984. Over the period of time, PMC realized that, its schemes can be
implemented well through a group of poor especially women, as group
mechanism has proved to be successful in many parts of India in solving
poverty related problems.
This motivated PMC to form SHGs on large scale and implement its
development schemes through SHG mechanism. This task was then assigned
to UCD department now renamed as Samaj Vikas Vibhag.
Objectives, Hypotheses and Research Methodology
Micro-credit programmes through SHGs are different from other
poverty alleviation programmes. It targets the rural and urban households
below the poverty line and assures the poor women of employment and
income. It also helps the poor women to build their skills and capacities and
provide access to finances without collateral. It empowers them not only
economically but also socially.
Objectives of the study:

• To study the functioning of SHG model in the process of developing
women entrepreneurship.
• To Study the status of socio - economic empowerment of women, as a
result of self-employment.
• To study the problems, challenges and opportunities of SHGs.
• To suggest viable measures for the improvement in the functioning of
SHGs.
Hypotheses
• SHG is an important instrument in the development of women
entrepreneurship.
• SHGs have contributed largely to socio-economic empowerment of
women.
• Self – employment of women has resulted into the development of
personality and skills of women entrepreneurs.
Research Methodology
The survey method is used for collecting the data from women
entrepreneurs. A separate questionnaire was prepared for collecting the
information relating to their groups, rules of working, capital required, type
of business carried, loan taken etc., along with their opinion regarding their
socio-economic empowerment.
For recording the data, Excel Sheets were used. Initially simple
frequency table and percentages were used. Since, the nature of data is of
qualitative type, hypotheses are being supported by qualitative analysis.
However, to support them statistically, 'Z' test for proportion is being used.
Scope and Limitations of the study
The scope of the study is geographically restricted to Pune city only.
The researcher has observed that, the SHGs are being formed by different
organizations such as NGOs, Government departments for development,
Association of Individuals, MFIs etc. They are also financed by different
financial institutions such as banks, MFIs, Credit Societies, Self-help group
Promoting Institutions, Non-Government Organization and through various

Government-programmes. As observed, out of around 10000 SHGs working
in the city, around 8000 are formed by UCD Department of PMC. Hence, this
study is restricted to analysis of SHGs, registered with UCD Department only
and financed by banks only. As observed by the researcher, more than 95%
of the SHGs are women based groups. Hence scope is restricted to women
SHGs only that too, only to those women who lay their hands on activities
involving entrepreneurial skills.
Selection of Sample
The SHG movement was introduced in the year 1999-2000 which
coincided with the United Nations Organization’s special programme for
women empowerment as well. The credit of introducing the concept of SHG
for the first time in Pune city goes to Late Mr. A. V. Kalmakar, Assistant
Municipal Commissioner and In Charge of UCD Programme. To begin with,
the concept was introduced in slum areas of Pune city. However, at present,
it has spread its wings successfully almost in each corner of the city. UCD is
following Kerala model, involving mainly the association of women from
economically weaker sections of the population. For proper implementation
of the development plans, Pune city has been divided into 4 zones, having 15
ward offices, sub-divided into 76 prabhags. In all, there are around 8000
SHGs working under the guidance of PMC in Pune city. The researcher has
selected more or less equal numbers of SHGs from all the Prabhags in
consultation with the Corporation Authorities and Prabhag Incharge known
as Samuh Sanghatika. Every SHG has around 12 to 15 members, of which
around 40 to 60% of the members carry some type of business. Accordingly,
data was collected from 500 entrepreneur members from 200 SHGs.
4.3 The working of SHGs
The job of Samuh Sanghatika( Bachat Gats) in relation to SHG starts
with a survey of their Prabhag. They search for the group of women having
meagre resources and who remain confined to the round-the-clock efforts to
redeem their families from sinking into abject penury. Such areas create a
possibility of forming an SHG.
Then, Samuh Sanghatikas conduct the meeting of interested members

and explain the rules and regulations of working of SHG. Three
representatives are then selected from the interested members to work as
Sanghatika, Sah Sanghatika and Hishobnis for operating the bank
transactions and for overall management of the gat. The Municipal
Corporation then organises a three days training programme for these 3
representatives, which helps them in managing the Gat smoothly.
After successful completion of the training programme, Municipal
Corporation issues them training certificate and letter in favour of a
convenient nationalised bank, requesting the bank to open savings A/c in the
name of Bachat gat. At this stage, Bachat gat gets registered with the
Corporation. After depositing the initial amount of savings in the bank, bank
issues pass book and cheque book in the name of Bachat gat. Corporation
issues personal pass book to every member of the gat. At the end of the year,
again one day training is given to the representatives of the gat for preparing
annual accounts which are then submitted to the Corporation.
UCD Department has issued guidelines in detail regarding the
formation and working of Bachat Gat (SHG). It relates to number of
members in a Gat, fees to be paid, meetings to be conducted, interest to be
charged on loans etc.
In addition to the formation and overall control over SHGs, Corporation
organises exhibitions, 2 times a year, for marketing the products of Bachat
gat. Similarly, in order to create a market base for SHGs, PMC is organizing
‘Bachat Bazar’ for last six years during Diwali season. It is also planning to
erect additional permanent platform to sell the products of SHGs in various
parts of the city. Corporation also arranges training programmes for
entrepreneurs through eight institutions to improve their skills.
From the above it is clear that the Pune Municipal Corporation is
helping the Gat in all possible ways for its successful working and in fact
expects the overall development of its members along with their socio
economic empowerment.
Analysis and Interpretation of Data

Table 1: Classification of Members according to the Level of Education
As observed, many SHG members are completing their education after

joining the group due to the guidance from the employees of Corporation as
well as from the Sanghatikas of SHG. It is also seen that, majority of the
educated women of SHGs have joined the group as Sanghatikas as social
work, in order to help illiterate women by making use of their skills,
knowledge and experience. Similarly, SHG members get the training of
maintaining records, operating bank account and preparing annual accounts
from the Corporation. Due to all these factors, SHG members are seen to be
educated.
Table 2: Classification of Members According to Source of Knowledge

about SHGs
As observed, 59% of the members were associated to SHGs through

Samuh Sanghatikas and 41% have received the information through their
friends. This shows that Samuh Sanghatikas are working efficiently and are
successful in their duties to a great extent.
Table 3: Distribution of SHG members according to the use of

Savings used
• Members have opted for multiple options.

Figure 3
It can be observed from the percentages that 1st preference is for

education, 2nd for business, 3rd is health and then for household purposes.
This is a positive sign of SHG movement as their children are getting
educated which will improve the overall literacy level in the society.
Table 4: Guidance received by Members in Selection of Business
Figure 4
From the above figure it is clear that SHG is helping in development of

women entrepreneurship as 31% of member women are motivated for clear
that SHG is helping in development of women entrepreneurship. Hence
women say that it as an important instrument in development of
entrepreneurship which supports our first hypothesis.
Table 5: Classification According to the Business Commencement Stage
Figure 5
As observed 34% of the members have started business after joining the
group which supports the first hypothesis that SHG is an important
instrument in development of entrepreneurship.
Table 6: Distribution According to the Benefit Received
Figure 6
Majority of the members (85%) have said that their business is benefited
because of group mechanism. The benefit is in the form of increased volume
of business due to strong relations developed among the group and increased
contacts due to common meetings, exhibitions, training programs etc. This is
obvious because the group is formed for a minimum period of 5 years and as
such a bond of intimacy gets developed among members over a period of
time.
Table 7: Training to Members
Figure 7
As observed most of the SHG members have received training from the
Corporation. This shows that Corporation is playing a very promising role
not only in forming SHGs but also in developing entrepreneurial skill among
members by giving them training which is free of cost.
Table 8: Sources of Raising Capital
Figure 8
As observed, majority of the members from both the groups have raised
the capital from their personal savings i.e. self-financing. The second major
source of raising capital is, loan from Bachat Gat.
Table 9: Loans and Borrowings
Figure 9
AS observed majority of the members are taking loans mainly for

business purposes and for education of children.
Table 10: Economic Independence
Figure 10
Majority of the members feel that they are economical independent at

least to some extent.
Table 11: Member’s Position in the Society
Figure 11
Majority of the members feel that their position in the society has
improved.
Table 12: Member’s Position in Family
Figure 12
Majority of the members feel that their position in the family has
improved.
Table 13: Free and Independent Decision Making
Figure 13
More than 80% of the members feel that they are free to take decisions
about their personal matter.
Table 14: Participation in Decision Making Process Relating to

Family Matters
Figure 14
Majority of the members have said that they are involved in the decision
making process of the family to most of the times.
• From the tables 10 to 14 it is clear that there is socio-economic
empowerment of women which supports our second hypothesis.
Table 15: Improvementin Talents and Skills of Members
Figure 15
As observed from the percentages regarding the changes in various

skills resulting into improved personality, we can conclude that, the women
entrepreneurs have benefited after joining the group. Thus, the
entrepreneurial activity has resulted in improving the skills of members.
which proves the hypothesis that ‘Self–employment of women has resulted
into the development of personality and skills of women entrepreneurs.’
Major Findings
1. The members of all the groups are happy with the positive role played
by community leaders i.e. Samuh Sanghatikas
2. The most common business run by majority of the members are related
to 'catering and tailoring'.

3. Majority of the members appreciated that; they could expand their
business only because of the strong support of the group members and
the officers of UCD Department.
4. Cut-throat competition in the market is a major problem faced by most
of the members while carrying business.
5. Majority of the members are taking loans mainly for business purposes.
6. All the members unanimously said that, their personal income has
increased after forming a gat, and they have freedom in utilizing their
own earnings.
7. Women from the groups accepted that, there is a phenomenal rise in
their status in the family and society, after becoming a member of the
gat.
8. All the members have appreciated the role of group in improving their
skills and abilities.
9. The loan amount to be sanctioned to the SHG by bank is tied up with
the savings of that SHG.
Conclusion
The SHG model has resulted into exposure of women to financial and
business literacy and skills among women leading to their socio-economic
empowerment. However, insufficient credit supply coupled with the general
disinterest of banks to lend to SHGs and lack of diversity in the credit
services offered, have made this model somewhat ineffective. To sum up, it
can be said that, this model has helped the poor women to come out of their
confined boundaries and undertake some entrepreneurial activity, resulting
into their socio-economic empowerment. Hence, this movement has proved
to be a golden opportunity in achieving the objective of `financial inclusion’
of the government.
Recommendations:
1. To Members: - The members should understand the power of group
mechanism and should try to improve their marketing skills, quality of
the product, and their own skills by joining training programmes.
2. To officers of UCD Department: - They should always act like a guide

and philosopher to the group and should try to solve their problems
honestly. They should follow all the guidelines of Government strictly.
3. To Financial Institutions: RBI and NABARD should exercise strict
control over the working of banks in respect of their lending policies to
SHGs. Banks should support SHGs in all possible ways and help the
Government in achieving its objective of 'poverty alleviation through
micro-financing.'
References
Pitta Usha (2010). Empowerment of Women and Self Help Groups, New Delhi:
Sonali Publications.
P. Sindhuja (2011). Economic Empowerment of Women through Self Help Group,
New Delhi: Discovery Publishing House Pvt Ltd.
Pangannavar, Arjun (2012). Self –Help Groups and Women Empowerment in India,
New Delhi: New Century Publications.
Tandon (BB) and Grag (2009). Inclusivity & Sustainable Development.
Indian Journal of Public Administration, 882-891.
Meenai (2010). Women’s Empowerment & Micro credit: Emerging spaces for social
work practices. Indian Journal of social work, 28-54.
Reddy, K. Raja & Reddy, C.S. (2010). What are SHG members doing with large
loans? Indian Journal of Social Work, 103-115.
Arun (2010). Goodbye Microfinance. Economic Times 12 August 2010.
Reji (2009) Microfinance & Women Empowerment. A general framework for
assessment of women empowerment. Indian Journal of Social Work, 557-570.
George Paul and Sara John P. Comparative Analysis of MFI and SHG-Banking
Models.
S.Sarma and M.Mehta. The Best Model for Micro-Lending : Self-help group or Joint
Liability Group?
The Authors
Dr. Rajashree Shinde is Director of S.K.N Sinhagad School of Business
Management, Pune.
Ashwini Joshi is Associate Faculty with the Institute of Company Secretaries of
India, Pune Chapter.
E-mail: rajashreeashinde@gmail.com, aswini.nj69@gmail.com
• Received on: 11, Jul. 2016
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Journal of Commerce & Management Thought

Vol. 7-4, 2016, pp 633-655

Keywords : Micro Finance, Women Empowerment, Capacity

There are two most prominent modes of delivering micro-finance in India.

acquired a reputation as `The Oxford of the East’. It is the second largest

Objectives of the study:

Promoting Institutions, Non-Government Organization and through various

Then, Samuh Sanghatikas conduct the meeting of interested members

Analysis and Interpretation of Data

As observed, many SHG members are completing their education after

Table 2: Classification of Members According to Source of Knowledge

As observed, 59% of the members were associated to SHGs through

Table 3: Distribution of SHG members according to the use of

• Members have opted for multiple options.

It can be observed from the percentages that 1st preference is for

Table 4: Guidance received by Members in Selection of Business

From the above figure it is clear that SHG is helping in development of

Table 5: Classification According to the Business Commencement Stage

AS observed majority of the members are taking loans mainly for

Majority of the members feel that they are economical independent at

Table 12: Member’s Position in Family

Table 13: Free and Independent Decision Making

Table 14: Participation in Decision Making Process Relating to

Table 15: Improvementin Talents and Skills of Members

As observed from the percentages regarding the changes in various

to 'catering and tailoring'.

2. To officers of UCD Department: - They should always act like a guide

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