Impact of microfinance on women’s empowerment: a case study on two microfinance institutions in Sri Lanka

Abstract

This study investigates the impact of microfinance on poverty and socio-economic vulnerability of women and the ability to form social capital through group-based micro loans. The study uses four criteria to examine the impact of microfinance on poverty and vulnerability of women borrowers. The four criteria are, access, creation and control over private resources; freedom of decision making at home; self-confidence on socio-economic activities; and status in community and family. The study assumes that if these four variables have positively affected a woman, then she is empowered by microfinance received. The study uses three logistic regression models and a women’s empowerment index to analyse women’s empowerment. The logistic results revealed that the household income level before taking microcredit, age of the household head and market availability for products have been significant in affecting women’s empowerment and reducing vulnerability. The disaggregated and overall Women Empowerment Indices (WEIs) clearly illustrate a considerable development after joining the microfinance institutions (MFIs). The analysis found that if the woman owned the loan and acted as a conduit of credit, it had a positive and significant impact on her ability to make decisions at home.