MICROFINANCE PAPER WRAP-UP: Women and Income-Generating Activities: Understanding Motivations by Prioritising Skill, Knowledge and Capabilities, by Thanuja Mummidi

Written by Thanuja Mummidi, published by the Rural Microfinance and Employment project (RUME) in June 2009, 27 pages, available at: http://www.rume-rural-microfinance.org/IMG/pdf_WP5.pdf

This study examines a methodology for analyzing whether or not microfinance promotes income-generating activities amongst the poor, specifically focusing on women. The author proposes that it is critical to study the life of the credit recipient because local socioeconomic dynamics play a key role in determining a woman’s income-generating activity. A “livelihood framework” explores people’s strategies, motivations, skills, knowledge and capabilities to find patterns in determining what income-generating activity they will take up.

The main idea of the livelihood framework is that “1) livelihood depends on people’s capabilities 2) these capabilities are based on their resource base, their skills and their capacities to act 3) this within specific social, economic, political, ecological and cultural contexts 4) and access to resources is related to political, economic and socio-cultural circumstances.” The study has adapted the livelihood framework to highlight the different resources at women’s disposal and in turn explain why they are motivated to choose a particular income-generating activity.

In order to test the theory, six members of self-help groups were interviewed from two different districts in the Tamil Nadu state of India. The dominant practice in the Indian microfinance landscape, self-help groups are like microbanks of fifteen to twenty people who manage the allocation of loans amongst the members from two sources. Internal loans are sourced from the savings of the members, while the external loans are typically from banks via a non-governmental organization (NGO).

Five “resource bases” are identified by the author as key factors in why the women studied chose particular income-generating activities. The first resource is social resource, which includes their household, extended kin network and caste as well as the larger multi-caste village and work environment. Second is human resource, defined as each woman’s specific ability to do physical work, i.e. if she is young she may be able to do more physically demanding work, while if she is older or ill she may not be as physically capable. Third is physical resource, referring to the infrastructure available, i.e. roads and public transport. Fourth is natural resource, meaning ownership of and leasing of agricultural land, as well as access to agricultural wage labor. Fifth is financial resource, provided by kin networks, MFIs and banks through self-help groups.

The author acknowledges the high level of resources required to assess livelihood frameworks due to their broad scope. However, the author concludes that because livelihoods are controlled by many factors, as in the five “resource bases” within the framework, observers should not make the mistake of narrowly judging the impact of microfinance on enterprise development. In order to truly understand the impact of microfinance, it is valuable to use the livelihood framework to understand the roots of a woman’s motivations, what pushes a woman to withstand the shocks of income generation, or what factors lead to failure.

By: Christine Chang, Research Associate

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