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The effects of microfinance on women's empowerment: New evidence from

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Article  in  International Journal of Social Economics · October 2017

DOI: 10.1108/IJSE-02-2016-0070

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 International Journal of Social Economics
The effects of microfinance on women’s empowerment: new evidence from
Bangladesh
Mohammad Mafizur Rahman, Rasheda Khanam, Son Nghiem,
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Mohammad Mafizur Rahman, Rasheda Khanam, Son Nghiem, (2017) "The effects of microfinance on
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Vol. 44 Issue: 12, pp.1745-1757, https://doi.org/10.1108/IJSE-02-2016-0070
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(2018),"Is women empowerment a zero sum game? Unintended consequences of microfinance
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doi.org/10.1108/IJEBR-04-2017-0114</a>
(2011),"Microfinance and women entrepreneurs in Pakistan", International Journal
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Women’s
The effects of microfinance on empowerment
women’s empowerment: new
evidence from Bangladesh
Mohammad Mafizur Rahman and Rasheda Khanam 1745
Faculty of Business, Education, Law and Arts,
Received 18 March 2016
University of Southern Queensland, Toowoomba, Australia, and Revised 20 July 2016
Son Nghiem Accepted 16 September 2016

Australian Research Centre for Health Services Innovation,

Downloaded by University of Southern Queensland At 20:52 17 April 2018 (PT)

Queensland University of Technology, Brisbane, Australia

Abstract
Purpose – The purpose of this paper is to examine the effects of microcredit on women’s empowerment in
rural Bangladesh using the latest primary data.
Design/methodology/approach – Primary data have been collected by a household survey in the four
districts of Bangladesh. Logistic regression is used to estimate the odd of improving women empowerment
after participating in microfinance.
Findings – The results show positive impacts of microfinance on most of the selected indicators for
women’s empowerment.
Research limitations/implications – Lack of control groups and baseline data are the main limitation
of this research. Future research can address this issue by selecting institutions with baseline data or
control groups.
Practical implications – The findings of the study can help policy makers to adopt appropriate policies
that integrate empowerment in development projects with women.
Social implications – The results of this research could encourage more women to participate in
microfinance activities and development projects.
Originality/value – This research provides the most updated data from a primary survey in Bangladesh.
The authors also mitigate the possible selection biases by using a fixed-effects estimator.
Keywords Microfinance, Bangladesh, Logistic regression, Household survey, Women’s empowerment
Paper type Research paper

1. Introduction
For more than three decades, microfinance programs are being considered as an
important development strategy all over the world, especially in developing countries.
Governments and nongovernment organizations (NGOs) in these countries have been
introducing and operating various credit programs that target the poor. Most of these
programs intentionally target women because they are more credit constrained, have
limited access to the wage labor market, have a negligible share of power in household
decision making and have higher records of loan repayment rates than that of men.
Thus, women are with small credit risk and are more likely to share the benefits of the
loan with other family members, especially their children. An increase of social and
political consciousness, training and skill development of this disadvantaged group
might also be the reasons for targeting women (Pitt et al., 2006; Aghion and Morduch,
2005; Hashemi et al., 1996; Kato and Kratzer, 2013).
Women constitute half of the population in any country, but their unemployment rate
is higher than that of men in virtually every country. Therefore, their strong participation International Journal of Social
Economics
in economic activities is essential for economic growth and nation building (Duflo, 2012). Vol. 44 No. 12, 2017
pp. 1745-1757
Referring to a recent World Bank report, Sarumathi and Mohan (2011) argue that © Emerald Publishing Limited
0306-8293
gender discriminating societies experience greater poverty, slower economic growth, DOI 10.1108/IJSE-02-2016-0070
 IJSE weaker governance and lower living standard for all people. So empowerment of women is
44,12 vital as it is closely related to economic development (Duflo, 2012) but it is a global
challenge because traditionally women have been marginalized in male-dominated
societies, especially in developing countries. Also, women constitute about 70 percent of
world’s poor (Khan and Noreen, 2012). Therefore, one of the top priorities of development
agencies and governments around the world is women’s empowerment. International aid
1746 donors, governments, policy makers and other development experts view microfinance or
microcredit as an important strategic tool to empower women involving them in the
development process (Ali and Hatta, 2012).
Empirical studies revealed that access to microfinance was significantly associated with
improvement in women’s empowerment (see e.g. Hashemi et al., 1996; De Gobbi, 2005;
Pitt et al., 2006; Garikipati, 2012; Kato and Kratzer, 2013). However, most of these studies did
not take into account the possible selection biases in microfinance due to, for example,
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the presence of unobserved characteristics that affects both decision to join microfinance
and empowerment. This paper addresses the selection biases issue by taking the
within-individual difference of outcome and controlling for village fixed effects. Our main
contribution to the literature is conducting a new survey with tailored recall questionnaires
to measure changes in women’s empowerment. We also mitigate the selection bias issue by
using a village fixed-effects estimator.

2. Conceptual framework: microfinance and women’s empowerment

Although microfinance and microcredit are very often interchangeably used, there is a
slight conceptual difference between these two terms. Microfinance includes a broader
range of financial services, e.g. credits, savings, insurance, housing loans, remittances,
money transfers and other financial products. Microcredit, which is a fundamental
component of microfinance, refers specifically to loans and the credit needs of poor
clients. The amount of such loan is less than US$1,000 in many countries although a few
exceptions are also observed worldwide. It is designed as a system of credit delivery
and mobilizing savings especially designed to meet the financial requirement of the poor
(Bhusal, 2010). The proceeds of microcredit are meant to be used as capital for a
small business so that the poor may become self-sufficient and eventually get out of
their poverty.
For the last few decades, microfinance institutions (MFIs) are being regarded as the
banks for the poor. Under the microfinance programs, poor people get a loan without
collateral or a steady income provided that they use it to start a business enterprise.
Loans are often paid back in daily, weekly or monthly installments. To ensure greater
security for the loans, MFIs provide loans to groups of people rather than individuals
although lending to individuals has become more popular. Today MFIs offer diversified
loan products to the poor under the umbrella of “microfinance” (UNFPA, 2010).
The term “empowerment” is viewed differently by different scholars. Sen (1993) notes
that empowerment is reflected in a person’s capability set, and capability depends on many
factors including personal characteristics of a person, proper food, good health, good shelter
and social arrangements. Mayoux (1998) believes that empowerment is related to the
process of internal change while Kabeer (2001) thinks that it is related to the capacity and
right to make decisions. Kabeer (1999) views that empowerment constitutes three
dimensions: resources (access and future claims to the material, human and social
resources), agency (the process of decision making, negotiation, etc.) and achievements
(well-being outcomes). From the psychological perspective, empowerment is control over
oneself and the situations one lives in (Francina and Joseph, 2013). The psychological
component of empowerment also includes the development of feelings that individuals are
able to improve their condition by freely acting at personal and societal levels and would
 succeed in their change efforts; the cognitive component includes individuals’ Women’s
understanding of conditions of their subordination and the root causes of such conditions empowerment
at family and society levels, and need for making self-choices that may go against
cultural and social expectations (Tandon, 2016). Quoting from Rappaport (1987) and Cornell
University Empowerment Group (1989), Henry (2011) narrates that empowerment can be
realized if the individual achieved a psychological sense of personal control and a social
influence including political power and legal rights, as well as being able to gain greater 1747
access to, and control over, the equal share of valued resources. UN (2012) reports that
empowerment is experienced when a person is able to participate in decisions affecting him
or her and to exercise some control over life choices even at limited scale. Empowerment can
exist both at individual and collective levels, and both types of empowerment are innately
linked (Sen, 1990). World Bank (2001), on its PovertyNet, defines empowerment as “the
process of increasing the capacity of individuals or groups to make choices, and to
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transform those choices into desired actions and outcomes.”

The concept of empowerment has more than one dimension. Clearly visible dimensions
for women’s empowerment are women’s absolute well-being and women’s relative well-
being. For absolute well-being, women’s empowerment is considered as the process of
improving the welfare of women which is indicated by outcomes that measure current
status regarding literacy, health and nutrition, labor force participation, contraceptive use,
mobility and ownership of clothing and assets. For relative well-being, women’s
empowerment is viewed as the process of improving the position of women relative to
men within the household which is indicated by women’s involvement in the intra-
household process such as decision making, control over household income and assets and
loans taken (Ali and Hatta, 2012). UNIFEM (2000) opines that women’s empowerment
consists of “gaining the ability to generate choices and exercise bargaining power […]
developing a sense of self-worth, a belief in one’s ability to secure desired changes, and the
right to control one’s life.” Women’s empowerment begins when they become aware of the
socio-psycho-cultural injustice that is being imposed to them, and also how inequality and
socio-cultural, economic and political forces are always adversely affecting them. It starts
with the understanding of women’s positive self-image, self-esteem, rights and duties,
capabilities and potentialities (Khanday et al., 2015).
The above discussion reveals that women’s empowerment is conceptually complex.
It is also methodologically difficult and challenging to measure and analyze. Its meaning is
very relative too. The meaning, outcomes and goals of empowerment vary based on
cultural, regional, social and political perspectives (Ali and Hatta, 2012). Whereas
measurement of empowerment is paramount because of its policy significance, women’s
empowerment has been identified as a primary development goal. Till now, no rigorous
method for measuring and tracking changes in levels of empowerment has been developed
by the World Bank or any other major development agency (Malhotra et al., 2002).
Most empirical studies did not measure the empowerment process (Osmani, 2007;
Latif, 2001); however, some key methods that researchers have used to measure
empowerment are: Gender Development Index, Gender Empowerment Measure, Qualitative
surveys, ethnographic investigations, focus group discussion and case studies.

3. A brief note on microfinance programs in Bangladesh

Bangladesh’s successful microfinance programs and its replicas worldwide were started in
1976 by a microloan initiative of Professor Yunus to poor villagers using his money.
The program became the popular Grameen Bank (GB), and its operational model has been
replicated worldwide. Now microcredit programs in Bangladesh are implemented by NGOs,
GB, state-owned and private commercial banks and specialized programs of some ministries
of Bangladesh Government. As of June 2014, total loan outstanding in the microfinance
 IJSE sector is around Taka 403 billion (including GB, government projects and commercial
44,12 banks) with total savings Taka 237 billion. The total clients of this sector are 33.73 million,
including 8.62 million clients from GB (www.mra.gov.bd). There are more than 1,000 MFIs
operating in the country, but the market power is highly concentrated: ten large MFIs and
GB represent 87 percent of total savings and 81 percent of total loan outstanding of the
sector (Bhusal, 2010). MFIs are operating more than 85,000 villages in Bangladesh, and over
1748 37 percent of the households have access to microcredit, which is among the highest
coverage in the world (Ahmad, 2006).
MFIs have the potential to play various roles to accelerate socio-economic development
of a country. The main ones are: to fill up a needed gap within the financial services industry
by offering small loans, or microloans, to the people who are unable to access conventional
loan services; to reduce poverty, unemployment rate and gender inequality; to empower
women providing microcredit, training, education and increase social awareness; to
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stimulate local economies by providing finance for small businesses; and to reduce rural-
urban income gap and to induce rural development. In this paper, we will focus on the third
point, i.e. microfinance and women’s empowerment.

4. Microfinance and women’s empowerment in Bangladesh: a review

The study of Hashemi et al. (1996) is probably the first empirical work that examined the
effects of rural microcredit program on women’s empowerment in Bangladesh. The study
constructed eight indicators to measure the empowerment: mobility, economic security,
ability to make small purchases, ability to make larger purchases, involvement in major
household decisions, relative freedom from domination within the family, political and legal
awareness and involvement in political campaigning and protests. Among these
components, making large purchases and involvement in family decisions were given
different weights while the remaining six components were given equal weight.
Respondents were given different points based on their responses on these indicators,
and empowerment is classified based on the scores obtained. The authors found that
participating in microfinance was significantly associated with improvement in most
empowering indicators. However, this study suffers from possible bias due to unobserved
individual, household and village/area characteristics, which may contribute to the
endogeneity of decision involved in program participation. Also, measurement scores for
identifying empowerment are not equal for all indicators; rather these are different in the
study. Hence, the findings may suffer from consistency as well.
Mahmud (2003) examined the impact of microcredit on women’s empowerment using a
longitudinal study on the evaluation and monitoring of microcredit programs in rural
Bangladesh which covered nearly 2,000 households in 91 villages (80 were program villages,
and 11 were non-program villages) of 22 rural thanas (sub-districts) of Bangladesh.
The findings of this study are that initial conditions of women’s empowerment in poor and
non-poor households were more or less similar before joining the program. Microcredit
program participation increased women’s access to resources like self-employment and
mobility into certain public spaces like health care center and the NGO office. This study,
too, has not addressed unobserved characteristics of chosen villages and individuals.
The increased mobility of microcredit program participants is not surprising because
program women are required to visit the NGO offices or MFIs, are often encouraged to be
self-employed and are always motivated to visit public health services.
Parvin et al. (2005) conducted a research in Dumuria thana (sub-district) of Khulna
district taking 80 samples of 6,000 beneficiaries of microcredit to examine the women’s
empowerment. The authors employed three indicators of empowerment: participation in
household decision making, control over income and access to assets. The results revealed
by the study indicate that women’s participation level in decision making for children’s
 education and the marriage-related matter remains more or less the same before and after Women’s
joining the microcredit program. However, after being involved in microcredit program empowerment
women’s earnings significantly increased their capability to express their opinion and make
the decision for meeting personal needs, buying household assets, availing treatment and
recreational facilities independently. The study also found that women had no full control
over their personal earnings. With regard to access to assets, the study found no significant
improvement in the level of empowerment of women. 1749
This study is based on only three specific elements of empowerment; it should have
considered other elements of women’s empowerment too. Also, this is a small sample study
which depends on only one area; out of 6,000 population, a sample of 80 may not be quite
representative. Moreover, the author used primary and secondary data but did not mention
how both types of data are compiled. A comparison between program and non-program
participants has not been made to draw the conclusion.
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Pitt et al. (2006) examined the effects of microcredit programs on women’s empowerment
in Bangladesh. The data source for this research was a large household survey conducted in
1998-1999 by the Bangladesh Institute for Development Studies in collaboration with the
World Bank. The researchers identified and grouped ten factors which are related to
empowerment of women. These are: purchasing, resource, finance, transaction
management, mobility and networks, activism, household attitudes, husband behavior,
fertility and parenting and combine all previous nine variables.
Their results revealed that microcredit programs for women increase the overall
empowerment of landless women. The authors also examined credit programs for men but,
unfortunately, they found no significant effects of these programs on women’s
empowerment. The study has given due attention to heterogeneity bias using a large set
of qualitative responses to questions designed for households.
Hossain (2015) analyzed the women empowerment in Bangladesh through microfinance
where no clear cut methodology is used. Using the secondary data, the author has just
highlighted the annual growth rate of borrowers, loans disbursement and loans recovery.
Empirical evidence on the association between participation in microfinance and violence
against women was mixed. Kabeer (2001) and Hashemi et al. (1996) found that microfinance
reduced violence, but Goetz and Sen Gupta (1996) and Rahman (1999) found the reverse.
Possible reasons for the reduction of violence are that owing to participating in microfinance
women were considered valuable in the family as they bring the loan money. On the other
hand, microfinance can lead to increasing domestic violence because women may be less
obedient or less tolerant to their husbands when gaining financial independence.
Overall, there was abundant evidence in the literature that participation in microfinance has
a significant association with improvement of various indicators on women empowerment.
However, the effects of microfinance on some indicators such as domestic violence were mixed.
Also, only a few studies paid attention to mitigating effects of unobservable characteristics that
affect both the decision to participate in microfinance and its outcomes.

5. Data and methodology

5.1 Data
This study is based on a field survey in Bangladesh conducted in 2014. The four districts of
Bangladesh were selected for the field survey using the main criterion that there must be an
MFI with clear eligibility criteria operates in the district. Three NGOs were selected by
applying purposive sampling technique. The Development Initiative for Social Advancement
was chosen purposively because the organization received the first national promising MFIs
award in the year 2009 from the Palli Karma-Sahayak Foundation. The GB and the
Bangladesh Rural Advancement Committee were selected as they were the largest and most
renowned MFIs in Bangladesh. Member-households were sampled from a list of microfinance
 IJSE members in each village. It was planned to select 25 households per village. However, some
44,12 households could not be found or had no adult at home and hence could not be interviewed.
Therefore, a total of 364 households were randomly selected from 20 villages in the four
districts (Comilla, Chandpur, Narayangonj and Narshingdi) of Bangladesh.
The household survey includes questions on demographics, production activities,
microfinance participation and outcomes of interests such as income, consumption, health,
1750 education and women empowerment. We also collected detailed data on characteristics of
villages, which include information on the distance to nearest educational institutions,
district council, health complex and market. The village information is collected from village
heads using the fill-in forms, rather than face-to-face interviews. The key variables
presented in Table I were selected based on the ground that they may affect the outcomes of
interests. Other variables such as the number of doctors and prices of other farm products
were not selected due to high correlation with selected variables.
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The descriptive statistics show that almost all households were headed by men despite
all microfinance participants are women. Thus, we do not include gender of households in
the analysis. The seniority of microfinance membership also varies significantly: some
households just joined the services about one month before the survey while others received
the services for 20 years. On average, households joined microfinance for 1.5 years,
and 30 percent of the households surveyed are poor, using the international poverty line of
$1.25 PPP per person per day. It is not surprising to see that 26 percent of household heads
were illiterate while the respective figure for their spouses is 43 percent because male are
still given priority in education in rural Bangladesh. However, the average income is slightly
lower than the average consumption in the sample, suggesting that some households have
to use loans to smooth out the shortfall in consumption.

Main variables Mean SD Min Max

Household characteristics
Age of household head (years) 40.21 7.87 20.00 69.00
Gender of household head (male ¼ 1) 0.98 0.13 0.00 1.00
Ethnicity (minority ¼ 1) 0.12 0.33 0.00 1.00
Education of HH (illiterate ¼ 1) 0.26 0.44 0.00 1.00
Education of spouse (illiterate ¼ 1) 0.43 0.50 0.00 1.00
Occupation ( farmers/laborers ¼ 1)
Type of employment ( full-time ¼ 1) 0.77 0.42 0.00 1.00
Household size (people) 4.79 1.29 2.00 9.00
People in labor age (people) 2.84 1.17 1.00 7.00
Household income (Taka) 210,424 112,328 6,400 741,875
Income per adult-equivalent (Taka) 97,978 55,285 3,200 428,322
Household consumption (Taka) 103,189 49,264 12,000 344,000
Consumption per adult-equivalent (Taka) 47,768 22,290 6,000 153,841
Duration in microfinance (months) 32 28 1 240
Total loans received (Taka) 52,387 56,917 1,000 450,000
Outstanding loans (Taka) 9,726 27,291 0 275,000
Borrowed loans (yes ¼ 1) 0.93 0.25 0.00 1.00
Received training (yes ¼ 1) 0.31 0.46 0.00 1.00
Poverty status measured by $1.25 PPP/person/day (poor ¼ 1) 0.30 0.46 0.00 1.00
Village characteristics
Table I. Illiteracy rate (percent) 19.10 11.69 1.00 44.00
Descriptive statistics Distance to health center (km) 12.05 25.35 0.50 99.00
of independent Wheat prices (Taka/kg) 23.41 4.87 15.00 30.00
variables Casual wage (Taka/day) 300.00 72.64 150.00 500.00
 Most borrowers of MFIs in this study also receive credit from other sources when the loan Women’s
amount from microfinance is not enough to satisfy their investment or consumption need. empowerment
In particular, other major sources of finance of borrowers in our sample include: banks
(45 percent), relative/friends (33 percent), money lenders (14 percent) and selling farm
products (6 percent). Despite having alternative sources of credit, we believe that only MFIs
provide educational activities that lead to empowerment of women. Unfortunately, we did
not find any information on cross-borrowing between MFIs from this survey. 1751
5.2 Empowerment after joining microfinance
Based on the literature reviewed, we focus on examining the effects of microfinance on key
empowerment indicators: participate in the family decision-making process, access to the
family asset, security and dignity. These indicators are the responses to Likert scale
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questions. For example, data on the role of women in the family decision-making process
were collected from responses to three-point Likert question: women did not participate,
make the decision alone and jointly make a decision with husband. The same questions were
repeated to explore the situation (e.g. participate in decision making) before they join the
microfinance programs, which is on average 1.5 years ago (the questionnaire may be
provided upon request). We take the difference of responses to empowerment
questionnaires after participating in microfinance programs to remove the time-invariant
individual unobserved characteristics. We acknowledge that recall questions may suffer
from recall bias. We take the advantage of face-to-face interviews to address this issue by
training surveyors to paraphrase some questions to double check the accuracy of
respondents. The MFIs have no baseline data on empowerment, and hence, recall questions
are the second best option to assess impact in this study.
We recode changes in empowerment indicators into binary outcomes that equal 1 if the
changes were positive (i.e. the condition gets better after joining microfinance) and 0 otherwise.
Table II presents differences in empowerment after joining microfinance; higher
responses indicate better outcomes. A t-test reveals that there are significant improvements
in all measures of empowerment after participating in microfinance. A Wilcoxon test also
confirms that medians of responses for all criteria differ at the 1 percent significant level.
The average improvement is presented in Figure 1, showing that health care for children
and women is in the lower end with about 30 percent of households were improved.

Empowerment indicator Before After Difference t-test (p-value)

Decision on child’s education 1.39 2.49 1.10 0.00

Decision on children’s marriage 1.58 2.69 1.11 0.00
Decision on buying household items 1.70 2.60 0.90 0.00
Decision on buying personal items 1.62 2.43 0.81 0.00
Decision on buying assets 1.84 2.70 0.86 0.00
Decision on contraceptives 1.55 2.50 0.95 0.00
Decision on medical treatment 1.65 2.52 0.87 0.00
Decision on recreations 1.57 2.57 1.00 0.00
Decision on visiting relatives 1.58 2.58 1.00 0.00
Decision on voting 1.63 2.50 0.87 0.00
Decision on borrowing 1.57 2.70 1.13 0.00
Control on income 1.55 2.55 1.01 0.00 Table II.
Access to family assets 1.63 2.56 0.93 0.00 Differences in
Feel secure and strong 0.23 0.84 0.62 0.00 empowerment
Feeling proud and dignified 1.74 2.69 0.95 0.00 measures after
Freedom to move 1.61 2.54 0.93 0.00 joining microfinance
 IJSE 80%
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1752 20%
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In contrast, important indicators such as feeling proud and dignified, control of income and
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However, results in Figure 1 did not take into account the effects of other covariates.

5.3 Methodology
Since empowerment indicators are presented in a binary format, we use logistic regression
to estimate these changes, after controlling for the key variables of interest.
The advantage of this option is that we can easily interpret the odd ratio directly
(the alternative estimator is probit, for which we need to go one extra step to calculate the
marginal effects as its parameters cannot be interpreted directly). One of the main issues
in analyzing effects of microfinance services is the selection bias. Since microfinance
participants select themselves to receive services, unobserved individual characteristics of
microfinance members (e.g. risk attitudes, social and business skills) would affect
outcomes of interest such as household income, poverty status and women empowerment.
For example, women with good inter-personal skills, which are often associated with
better empowerment indicators, are more likely to participate in microfinance. Thus, the
effects of microfinance on empowerment are more likely to be over-estimated if selection
bias is not taken into account. In particular, we estimate the impacts of microfinance on
women empowerment using the following equation:
yij ¼ aþb1 M F ij þb2 H ij þb3 V j þuj þeij

where yij is the outcome of interest (women empowerment) for household i in village j, which is
a dummy variable that equals 1 if the changes were positive (i.e. the condition gets better after
joining microfinance) and 0 otherwise; MF is the measure of participation in microfinance;
H includes household characteristics; V represents characteristics of the village; u presents the
unobserved characteristics of the household that assumed to be stable within a village; and ε
is the random error term. We argue that u, which is a part of the composite error term, is
correlated with participation in microfinance (in other word, microfinance participation
is endogenous). Thus, standard estimation would produce bias results.
 There are two main estimators to address this endogeneity issue. Another approach such Women’s
as randomize control trials by Banerjee et al. (2015) is gaining popular, but it is time and empowerment
resource intensive, and more importantly even randomization does not guarantee causation
(Heckman and Vytlacil, 2005). The first is a fixed-effects estimator, which uses a dummy
variable for each village (using one arbitrarily selected village as a reference). These village
dummies will capture all observed and unobserved effects within a village, including u.
The second is a random-effects estimator, which assumes that observed and unobserved 1753
effects are strongly correlated. Moreover, hence, the effects of u, can be mitigated by using a
set of observable village characteristics. The fixed-effects estimator is consistent, but it is
not efficient when the distribution of u is random (i.e. endogenous is not an issue).
We use a Hausman specification test to select between the two estimations. Under the
null hypothesis of no endogeneity, parameters estimated by fixed effects and random effects
are similar. Thus, if the null hypothesis is rejected, a fixed-effects estimator is preferred;
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otherwise the random-effects estimator is preferred. The test results show that the null
hypothesis is not rejected for almost all indicators. Thus, we report the results from the
random effects for the indicators of empowerment.

6. Results and discussions

We choose the membership duration as a proxy for participation in microfinance. We expect
that the longer household participates in microfinance program, the more likely that women
will be empowered. This choice has several advantages to other variables (e.g. outstanding
loans): it reflects the cumulative effects of microfinance and relatively easy for respondents
to recall.
The results of random-effect estimation are reported in Table III. The obtained results
confirm that most indicators of women empowerment improved significantly after
participating in microfinance. The biggest gain is a decision on child’s education where the
odd of improvement when participating in microfinance for three years is 23 times
compared to those participating for one year only. However, the more encouraging results is

Two years in MF Three years in MF Four years or more in MF

Empowerment indicators OR SE OR SE OR SE

Decision on child’s education 3.46 3.58 23.02*** 25.51 7.43** 7.20

Decision on children’s marriage 1.33 0.90 2.99 2.49 2.67 2.18
Decision on buying household item 0.53 0.35 3.77* 2.80 2.06 1.50
Decision on buying personal items 2.80 2.56 5.62* 5.03 6.00** 5.40
Decision on buying assets 1.11 0.75 1.01 0.75 0.93 0.70
Decision on contraceptives 3.63 3.29 4.42* 3.94 3.95 3.41
Decision on medical treatment 1.18 0.75 3.28* 2.34 4.00* 2.94
Decision on recreations 1.32 0.89 2.65 2.04 4.16* 3.29
Decision on visiting relatives 0.85 0.56 4.70** 3.65 5.64** 4.41
Decision on voting 0.47 0.29 0.67 0.44 0.85 0.57
Decision on borrowing 0.40 0.37 0.27 0.23 0.53 0.46
Control on income 2.90 2.34 3.46 2.64 4.36* 3.64
Access to family assets 1.57 1.26 1.31 0.95 1.63 1.24
Proud and dignified 1.58 1.25 1.38 0.97 2.24 1.70
Freedom to move 2.58 1.69 1.51 0.89 1.09 0.66
Table III.
Feel secure and strong 2.16* 1.00 4.10*** 2.13 2.54* 1.35
Effects of
Notes: The control variables used in the random-effects model are the age of the household head, education microfinance
of the household head and spouse, ethnic minority status, occupation of the household head, type of participation on
employment, number of people in the family, dependency ratio, log of income per capita and village dummies. women’s
*,**,***Significant at 0.1, 0.05 and 0.01 levels empowerment
 IJSE that women are at least more than twice likely to feel strong and secure after participating in
44,12 microfinance programs for at least two years. Other indicators seem to require more time to
experience an effect as their parameter only significant for those participating in
microfinance for at least three years: decision on visiting relatives (odd ratio of about 5),
decision on medical treatment (odd ratio of more than 3) and decision on buying personal
items (odd ratio of about 6). However, some empowering indicators such as a decision on
1754 contraceptive, the decision on buying household items, the decision on recreation activities
and even control of income are only significant for one group of participants, suggesting
that women still have more room to improve in these sectors.
The results did not show any significant improvement in access to family assets,
freedom to move, the decision on borrowing, the decision on voting, the decision on buying
assets and the decision on children’s marriage. With regard to these indicators of
empowerment, husband decision or at least joint family decision plays a dominating role in
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the Bangladesh society.

7. Conclusions
Microfinance program is considered as an important development strategy to reduce
poverty and to empower the rural women in Bangladesh like many other developing
countries. More than 1,000 MFIs are operating in Bangladesh covering more than 85,000
villages, and over 37 percent of the households have access to microcredit.
We have analyzed the conceptual framework of microfinance and women’s
empowerment and highlighted the microfinance operation in Bangladesh. We have
particularly focused on the detailed evaluation of findings of the past notable empirical
studies on Bangladesh’s microcredit programs and women’s empowerment. Finally, we
have presented and analyzed our survey results of microfinance on women’s empowerment
in Bangladesh.
Our study reveals that microfinance has a positive impact on women’s empowerment in
Bangladesh although the extent of impact varies on different measures. Women’s
empowerment about decision on child’s education, the decision on visiting relatives, the
decision on medical treatment, the decision on contraceptives, the decision on buying
personal items, the decision on buying household items, control on income and feeling
secure and strong in the family has increased noticeably after taking microfinance facilities.
Microfinance may not always be empowering for all women, but most women do
experience some degree of empowerment by this opportunity. Therefore, it has the potential
to have a powerful impact on women’s empowerment. Microcredit to women strengthens
women’s financial base and enhances economic contribution to their families and
communities; it increases bargaining power and decision making, improves welfare, reduces
subordination and strengthens women’s voice. All these play an important role in
empowering them.
One thing is clear that microcredit alone will not completely empower women or
improve lives of women who have been oppressed for ages by the traditional
male-dominated society in Bangladesh. Minimalist microfinance has many limitations
and, thus, cannot contribute effectively to empower poor women. The capacity building of
these poor women is essential to enjoy the empowerment. To increase empowerment
through capacity building, microcredit must be supplemented by a significant amount of
skills training and educational opportunities for these poor women. Note that we refer to
life-long education opportunities rather than traditional school-based education.
Microfinance programs do provide these life-long educational activities such as
discussions of home finance skills, women’s health and gender equity for participants.
Social and political awareness of these women must be raised, and proper training for
group members on entrepreneurship must be organized with the integrated approach by
 MFIs and other NGOs. MFIs should regularly monitor that allocated loans to women are Women’s
being used for its proper cause, and women have full control on it. Bangladesh empowerment
Government should also take a comprehensive program, e.g. setting up a separate
comprehensive training and educational unit, for these poor women to increase their
capacity building and productivity. Various social development activities such as adult
education, trade-related technical and vocational training must be provided to these
women to enhance women’s income-generating activities that in turn will empower them. 1755
Therefore, new models of microfinance should be developed where poor women should be
looked as entrepreneurs as well as stakeholders to empower them in an effective manner.

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Further reading
Armendariz, B. and Morduch, J. (2010), The Economics of Microfinance, MIT Press, Cambridge, UK.
Grameen Bank (2014), “Grameen Bank monthly report”, No. 409, February, available at:
www.grameen.info.org (accessed March 5, 2014).
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programme: a case study from Bangladesh”, Journal of Social Sciences, Vol. 5 No. 3, pp. 244-250.
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Paper No. 13, International Fund for Agricultural Development, Rome. empowerment
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Bangladesh”, Cultural Dynamics, Vol. 20 No. 5.
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www.mra.gov.bd (accessed February 28, 2014).
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groups in India”, Working Paper No. 2007:24, Department of Economics, Uppsala University,
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Web reference
Available at: www.mra.gov.bd (accessed July 14, 2016).
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Corresponding author
Mohammad Mafizur Rahman can be contacted at: mafiz.rahman@usq.edu.au

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