International Journal of Management (IJM)

Volume 11, Issue 6, June 2020, pp. 2459-2469, Article ID: IJM_11_06_235
Available online at https://iaeme.com/Home/issue/IJM?Volume=11&Issue=6
ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: https://doi.org/10.17605/OSF.IO/NVMZH

© IAEME Publication Scopus Indexed

IMPACT OF MICROFINANCE IN GENERATING

EMPLOYMENT AMONG WOMEN
Priyanka Purohit
Department of School of Management Studies, Graphic Era Hill University,
Dehradun, Uttarakhand, India 248002

ABSTRACT
When it comes to empowering the "Unreached Poor" and giving them with
access to financial services, Self Help Groups (SHGs) in India have shown to be the
most successful technique. Due to their prevalence among Nepalese microfinance
institutions, the research defined "microfinance services" as loan, savings, and
training opportunities, with "social empowerment" defined as the ability to make and
act on one's own decisions and to travel freely. Research shows that women who take
out microfinance loans are more likely to be gainfully employed, that their incomes
rise as a result, and that their influence on the economy as a whole is greater. As
these SHGs are demonstrating positive outcomes in the areas of poverty alleviation
and economic empowerment, they have been the subject of much research. This
research aims to illustrate the importance of Microfinance and SHGs in empowering
women in India, mostly via the use of secondary data analysis.
Key words: women empowerment, Microfinance, freedom in decision making, micro-
credit
Cite this Article: Priyanka Purohit, Impact of microfinance in generating
employment among women, International Journal of Management (IJM), 2020, 11(6),
pp. 2459-2469. https://doi.org/10.17605/OSF.IO/NVMZH
https://iaeme.com/Home/issue/IJM?Volume=11&Issue=6

1. INTRODUCTION
"As a loan fund especially meant for micro enterprises including agricultural, forestry,
agroforestry, horticultural, animal husbandry, handicrafts, fisheries, bamboo and jute crafting,
mushroom cultivation, etc., to provide required start-up capital for local needy people in an
organized manner" is one definition of microfinance. It encompasses the necessity for
bettering skill and entrepreneurial growth that would assist people escape poverty, savings,
money transfers, insurance, manufacturing, and capital investment credit are all services

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 Impact of microfinance in generating employment among women

provided by the financial sector. Having access to money and credit may kickstart or fortify a
'virtuoso spiral' of empowerment in which each step builds on the one before it. It has become
an important tool in the fight against the twin evils of poverty and unemployment, which
threaten the political and economic stability of nations all over the world, developed and
developing alike.
To pool their little resources and learn to conserve money, the impoverished in rural and
semi-urban areas often organize Self Help Groups. Members of the group have similar
incomes and agree to pool their resources to lend to one another in times of necessity or other
special circumstances (as determined by the group as a whole). To help its members save
money, these clubs have regular meetings and instruct them in basic bookkeeping procedures.
While they are too poor on their own to open a bank account, they are able to take the first
step toward joining the formal banking system by pooling their resources and doing so in the
name of the organization. RBI and NABARD's SBLP is an effort to encourage relationship
banking, in which the poor's preexisting connection with banks is strengthened via the social
mediation of NGOs. By pooling their little resources, the members of such a group hope to
achieve greater independence and security.
Microfinance institutions (MFIs) are nonprofit organizations that provide credit and
other financial services to low-income people who would not otherwise have access to them.
While there are thousands of banks throughout India, just a few hundred are microlenders in
the state of Karnataka. To those in need, particularly women, it provides a range of financial
options.
Women's economic independence improves their position in society and the home,
boosts their confidence, and allows them to take on leadership roles. For the rural poor,
especially rural women who are often marginalized in society, access to microfinance is
essential for achieving economic independence and putting an end to exploitation.
Those with little or no access to traditional banking institutions saw the advent of
microfinance as a ray of hope that would allow them to participate in the revitalization of
rural areas. Clients of microfinance programs are typically women, who are provided with
loans in order to boost their self-esteem, increase their likelihood of being involved in
decision-making at the household and community levels, and combat the societally prescribed
gender roles and responsibilities. According to research by Ocholah et al. (2013), women-
owned businesses benefit more from proper finance in terms of profit, productivity,
development, and expansion. However, despite the growing number of microfinance
institutions catering to women, the vast majority of women-owned businesses are still rather
modest in size, and even fewer are focused on expansion. Increasing women's access to
microfinance is expected to raise their income, which in turn improves their well-being and
causes a broader shift, which in turn improves gender equality (Basu, 2006). One of the aims
of SDG 2030 is to close the gender pay gap through increasing women's access to finance,
which will boost their earnings and narrow the wage difference between men and women.
Self-Help Groups (SHGs), which provide access to microfinance, have gained
widespread recognition as a cutting-edge strategy for eradicating rural poverty and fostering

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 Priyanka Purohit

economic growth. Reducing poverty, empowering women, and raising awareness via
microfinance and SHGs ultimately leads to sustainable development of the country as a
whole. Women have historically been the most marginalized and discriminated-against group
in society, and this is true not only in India. They have been very naive customers of the
financial industry, despite attempts from the government and non-government organizations.
Microfinance has emerged as a key tool for empowering women, especially rural women, in
recent times. Providing microfinance to women is seen as a lucrative business venture by both
the formal and semi-formal sectors of finance, such as commercial banks, NGOs, etc. Women
are actively taking part in the microfinance revolution by using the many available
microfinance services.
2. LITERATURE REVIEW
Prasad, H., Gyawali, M. (2011) case study of Nepal's Paschimanchal Grameen Bikash
Bank (PGBB) to evaluate the impact of microfinance on the development of microenterprises
and the creation of new jobs. Primary data for this research came from a combination of on-
the-ground surveys, interviews, and observations, while data from secondary sources filled up
any gaps. The sample size for the study was 115 randomly selected members. The majority of
respondents who obtained a microloan did so with the intention of using the funds to launch a
small company, demonstrating the program's effectiveness and significance in fostering the
development of new businesses and the production of new jobs. It is considered to be useful
in launching small businesses. Participation in microcredit programs is associated with an
increase in family and community employment prospects, according to the research. The
study's results supported the researcher's contention that the policy should be revised to give
training, as well as a range of credit options to boost the employment rate.
Arora, B., Singhal, A. (2013), Microfinancing is a program that helps low-income and
low-wealth households with a variety of financial services such loans, savings, money
transfers, and insurance. Microfinance has expanded as a need-based policy and program
within the development paradigm, targeting traditionally underserved demographics including
women, the poor, the rural, the underprivileged, etc. Micro-finance is predicated on the
premise that giving financially disadvantaged individuals access to resources like financing
will help them launch or grow a micro-enterprise and thereby lift themselves and their
families out of poverty. Microfinance has emerged as one of the most powerful tools for
improving the lives of the economically disadvantaged. According to the data, the housing
index and estimated income from microcredit loans both had positive effects on the well-
being of the recipients. However, researchers found that having access to the loan helped the
beneficiaries take advantage of economic opportunities by providing a foundation for
planning and expanding commercial operations, especially when adjusted for family size.
K Swapna (2017), Microfinance is developing as a potent weapon for povert y
alleviation in the new economy. When it comes to reaching out to India's "Un -reached Poor"
with financial services, the Self Help Group, Commercial Bank Linkage Programme is the
clear frontrunner. This has proven successful in empowering rural poor women by providing
for their basic material needs and fostering the growth of poor women's collective self-help

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 Impact of microfinance in generating employment among women

capacities. As a result of economic independence, women gain decision-making authority,

confidence, social standing, and roles within the home and community. This research was
conducted to support the claim that microfinance is increasingly being recognized as a means
of increasing women's economic autonomy. Microfinance groups were examined to see how
they affected economic autonomy and poverty reduction among rural women. Women's
empowerment in general is discussed, and suggestions are offered.
Mengstie, B. (2019), A plan to increase women's access to economic decision-making,
advancement in income, and ownership of assets is known as "women's economic
empowerment." The major purpose of this research is to investigate the role of microfinance
in empowering women financially. A total of 346 female microfinance borrowers were
surveyed using a questionnaire. Multiple regression and a paired t-test were used to examine
the data in the study. A multiple linear regression study indicated that women's economic
independence was significantly affected by age, marital status, education level, credit score,
and number of trainings. However, prior work experience in the business world did not
significantly affect women's economic independence. Mean income, assets, and savings all
increased after receiving microfinance services, according to a paired samples t-test.
Microfinance has a profoundly good impact on women's economic empowerment by raising
their independent income, expanding their asset base, and boosting their regular savings. The
research also shown that microfinance helps women become more financially independent
and confident company owners.
Munish Kapila, Anju Singla, M.L.Gupta (2016), The Indian government now places a
high priority on the empowerment and well-being of rural women. There have been several
efforts made to better the lives of rural women and unlock their unrealized potential as a
driving force in national and economic growth. The formation of Self-Help Groups among
rural women is one strategy for empowering women. Therefore, the purpose of this study is to
examine how access to microcredit via Self Help Groups has influenced financial autonomy
in rural Punjab State. Both primary and secondary sources were used in the study. A total of
318 SHG members and 106 SHG leaders were selected at random from the demographic of
interest. The secondary information was collected from authoritative national and state
government sources. It has been shown that when women have access to microcredit, they
earn more money and are thus more involved in household decision making. This is more
likely to have an impact on large debtors than on minor ones. Therefore, microcredit has
helped to increase women's economic independence. Microcredit has a positive impact and
strong correlation with the empowerment index in rural Punjab, according to a regression
analysis. Therefore, women should be encouraged to join Self Help Groups via a process of
incentive, since doing so is crucial to their advancement and the country's economic progress
as a whole. For SHGs in Punjab to be successful, issues including slow loan approval, small
loan amounts, a lack of skills-based education, and tough product promotion must be
addressed.

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 Priyanka Purohit

3. CONCEPTUAL FRAMEWORK
Microfinance has been shown to help women company owners in several ways,
including those shown in Figure 1. Microfinance's impact is measured by looking at how the
social and economic circumstances of female business owners have changed as a result of
their access to microloans and other microfinance services.

Figure 1 Conceptual Model for the Study

4. RESEARCH METHODOLOGY
Primary and secondary sources were used to compile information for this exploratory
investigation. Secondary sources such as academic publications, government documents, and
non-profit reports were mined for their information. A field survey was conducted in the area
of interest to collect the primary data. (Ghaziabad). To better understand the advantages and
disadvantages that women in SHGs experience, a field survey was performed in the district of
Ghaziabad. Size of Sample 50 samples were collected from three SHGs in the research
region. The information was gathered by interviewing the female members of SHGs using a
predetermined timetable. The plan includes both free-form and confined questions. The
analysis of the data is conducted using the simple correlation coefficient, the paired t-test,
cross tabulation, and percentage analysis.
5. DATA ANALYSIS AND FINDINGS

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 Impact of microfinance in generating employment among women

Only 30% of women have completed secondary school. 34% of women cannot read or
write at all. Only 6% of those who responded had completed college.

Microfinance, according to 88% of respondents, has significantly decreased their

poverty levels.

Nearly half of the recipients used the money toward growing or establishing a company.
It's fascinating to see that 20% of people who get a loan use it to pay off other loans they
already have. However, an indication of awareness is that 14% of respondents use a loan to
pay for their children's education.
Paired t-test
Table 1: Paired t-test table

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 Priyanka Purohit

Since the probability value is 0.000 (p<0.01), We find that the mean pay for SHG
members is considerably greater than the mean income for non-members, and so reject the
null hypothesis. As a result, the respondents' income has risen dramatically thanks to
microfinance.
Microfinance is significantly contributing to women's increased earnings, as shown by a
t test.
Table 2: Claimed impact of the microfinance freedom of the SHGs women
beneficiaries after joining the group

We have collected data from 38 members of various SHGs for this main survey. Table 2
shows that out of a total of 38 responses, 86.84% are making their own judgments, with 33
members deciding for themselves how to invest their share of the earnings. Only three of the
respondents (out of a total of 38) are making their own judgments about the acquisition of any
form of asset. The data show that just 7.89% of buyers are doing it on their own. Only 19 out
of 38 respondents actually went to the market, which means that only 50% of those polled had
the marketing knowledge to successfully sell their items and generate a profit. No one has any
influence over any of the 38 responders, thus everyone of them is free to make their own vote.
6. IMPACT OF MICROFINANCE ON EMPLOYMENT
In emerging countries, where joblessness and underemployment are major contributors
to low living standards, boosting the employment rate is of paramount importance.
Government and non-government organizations alike use a variety of developmental
initiatives to help the jobless improve their chances of finding work in the long-term. A
healthy financial system is essential to the growth of any economy. Since they may produce

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 Impact of microfinance in generating employment among women

income and mitigate poverty by channeling savings from those with surpluses to those with
deficits, they can effectively raise capital and alleviate poverty. By providing access to a
variety of financial services, MFIs provide the poor a fighting chance to improve their
standard of living. Therefore, microfinance institutions (MFIs) have a significant impact on
helping economically active impoverished women find and keep stable employment. Here we
looked at how Microfinance institutions in the Jigjig area have helped put women to work by
providing access to banking services and other forms of financial aid.
Table 3. Employment Status of Respondents

Owning Wilcoxon signed

income Respondents ranks test
generati
ng

activity Before After Z= -7.488

Asymp.sig(2-sided)=
C Pe C Perc
0.000
ount rcent ount ent

Yes 8 55 1 100
1 .48 46

No 6 44 - -
5 .52

Total 1 10 1 100
46 0 46

Table 3 displays the respondents' job history, broken down by whether or not they were
self-employed before to engaging with a microfinance institution and whether or not they are
now self-employed. Thus, prior to enrolling at the university, 55.48 percent of respondents
held income-generating enterprises and 44.52 percent did not, meaning that the latter were in
the labor force. After joining a microfinance organization, however, respondents' job
situations changed dramatically, and now all of them are actively engaged in businesses that
generate money. As a result, 44.52% of formerly jobless families are now working as a direct
result of joining or participating in a microfinance organization and using the financial
services offered by that institution.
7. ASSOCIATION BETWEEN MICROFINANCE SERVICES AND FREEDOM IN
DECISION MAKING
The ability of women to make decisions in the workplace and at home was discussed.
Women were polled on who has decision-making power in their homes and workplaces, and

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 Priyanka Purohit

how such institutions handle employee autonomy. After being involved with MFIs, we'll
make decisions based on what we think is best for ourselves or our families, depending on the
circumstances.
Table 4. Associations between microfinance services with decision making

This can be seen from Table 4, that there is a significant relationship between credit
facility, savings facility, training facility and freedom in decision making. Thus,
advancements in women's education, financial literacy, and access to credit result in more
confident female decision-makers. Significant at the 1% level, the correlation values show a
highly positive relationship. At the 95% confidence level, these association coefficients were
found to be significant. After being involved with microfinance, many women felt more
empowered to take on leadership roles in the home and in other areas of business. This may
be the case if they have the expertise and resources to be considered a valuable family
member by their relatives.
Table 5. Regression analysis of microfinance service

Table 5 reveals a 0.212 for R2. It means that 21.2 per cent variability of decision-
making independence can be explained by independent variables.
Table 6. Coefficient of microfinance service and freedom in decision making

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 Impact of microfinance in generating employment among women

All coefficients are statistically significant at the 5% level of significance, even when
the autonomy of microfinance service decisions is regressed. Means access to training that
boosts women's confidence and ability to make decisions, savings that give them access to
capital, and loans that can be leveraged against their income to start a company or expand an
existing one. Because of these norms, women are increasingly being asked to participate in
and even lead family and commercial choices.
8. CONCLUSION
According to the results of the aforementioned research, microfinance is having a
significant impact on the economic, social, and psychological well-being of women in India.
There was a significant correlation between access to microloans and women's economic
independence. Ninety-six percent plus of those polled said that they had input into major
family choices and were consulted on matters of significance. Having this kind of financial
independence is crucial. This research confirms previous findings that access to microfinance
services aids women in making sound financial decisions. Consistent outcomes are achieved
because the training center encourages women's decision-making skills and trust, saving gives
women access to money, and the credit center allows them to leverage their income to launch
or grow an existing firm. Microfinance has an effect on women's earnings and labor force
participation, according to the study's findings. Women's incomes and employment rates both
improved after receiving microfinancing. This finding demonstrates the significance of MFIs
in reducing poverty and enhancing women's economic independence by improving their
income and job opportunities. Although studies at various levels have reached conflicting
conclusions, microfinance has the potential to help the poor improve their standard of living
and play a significant positive role in advancing women's empowerment

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