Microfinance in focus

The book provides a sharp and convincing analysis of Indian microfinance self-help groups.

Published : Mar 14, 2018 12:30 IST

K. KALPANA’S study on the social and political fabric of Indian self-help group (SHG) microfinance is a most welcome contribution to what has long been a highly polarised debate, which has all too often been torn between microfinance “advocates” and “detractors” and disconnected from ground realities. It has also been overly focussed on “commercial microfinance” even though state-sponsored schemes remain an important, often neglected, feature of the microfinance landscape in various parts of the world.

Kalpana draws on long-term engagement in the field (in rural Tamil Nadu) in conjunction with a wide range of stakeholders. She offers a critical analysis of microfinance as a neoliberal tool that aims, in her own words, to transform poor rural women into “fiscal and disciplined subjects”. She equally shows how women have been resisting, manipulating and challenging non-governmental organisations (NGOs), bankers and government officials and thus managing to benefit from it, albeit in ways that are limited, unforeseen and out of line with official objectives.

In keeping with other studies (see, for instance, Rankin (2011) in Nepal and Karim (2011) in Bangladesh), she firstly highlights how SHGs act as efficient forms of governmentality. The delegation of client screening and monitoring to women’s collectives has brought about various techniques and devices that the women deploy to discipline themselves and their peers.

As the women are responsible for sustaining their own capital, not only are they driven to adopt highly cautious behaviours but to routinely exclude the weakest women on the basis of pre-existing sources of inequality and stereotypes on vulnerability. Gender and household-mediated identities are instrumental in assessing creditworthiness (“women of no means”, “widows”, “women without a man”, “wife of a habitual drunk, vagabond” have almost no chance of eligibility). The same goes for class: landholder households, government employees and small entrepreneurs are far better served. Caste seems to be less key as most SHGs are based in one neighbourhood and are as such already caste-based. Since “women know their place”, the most vulnerable among them often exclude themselves. Screening and selection nevertheless result in conflict and harsh negotiations among the women. And when vulnerable women join, many drop out or they “cannot endure the self-disciplining and the subjection to group discipline that the SHG demands” (page 93) or they are “pushed out”. This too leads to rivalry, resentment and feelings of injustice and betrayal.

Leaders’ role Group leaders play a key role in the daily management of group finances, and they are most often of a higher status. Such leadership demands authority, literacy skills and, ideally, proximity to political power. The leaders have discretionary power over membership selection and loan distribution—some do not hesitate to siphon off money for themselves—and sanctioning defaulters. Kalpana, however, highlights the ambiguity inherent in their role, which entails total commitment, the risk of rapidly losing one’s reputation in the event of a misstep, and accountability to a range of actors, all without any formal recognition or compensation.

Finally, while SHG microcredit from government loan schemes for self-employment is officially intended for “productive purposes”, it has done little to transform women into entrepreneurs. As observed elsewhere, Kalpana highlights the many barriers women face to setting up sustainable businesses, especially among the Scheduled Castes. SHG loans are thus mostly used to top up income, and the women often need to bribe officials for their complicity.

In brief, it seems that SHGs serve as powerful devices for peer monitoring and self-control. As such, they merely reproduce many pre-existing inequalities. This could be the end of the story. But Kalpana’s in-depth exploration of the daily lives of SHGs allows a more nuanced perspective to emerge. She discusses the various subtle ways in which women consistently look to negotiate, bypass or manipulate the rules that bankers, government officials and NGO representatives impose. Although rigidity and discipline remain the rule (rigorous account keeping for internal lending, on the basis of members’ savings, is a key criteria for accessing bank loans), some leaders adjust their internal account figures in order to persuade bankers of their financial capability.

If a banker turns to a SHG to recover overdue loans from members’ husbands or relatives, some leaders do their best to comply with the bankers’ orders, while others seek to protect the defaulters, removing them from the SHG list but lending to them informally. The leaders moreover have difficult relations with the bankers as many (although not all) of them are contemptuous or neglectful towards the women. This seems to be particularly the case for Dalit women. Their relations with officials and NGOs are complicated. Here, the women’s room for manoeuvre consists of resorting to competitive processes or blackmail, sometimes pitting actors against one another. SHGs are market shares. Officials, NGOs and bankers often compete for the maximum number of members, as the women are well aware.

Encounters with the state Not only are the women far from passive, but they also use SHGs strategically to demand state resources and challenge the existing order. Far beyond financial intermediation, at least some SHGs serve as platforms to make state government-sponsored programmes available. This is why women fight to keep their memberships despite the heavy costs (further reinforcing the inequality inherent in SHG membership, which the book only briefly refers to).

Kalpana gives examples from her own fieldwork and from other parts of India of how women have been using SHGs, for instance, to gain access to public schemes, take part in local panchayat meetings and voice requests, to demand and receive police support in the event of domestic violence and marital abuse, to challenge harassment and violence against women in public spaces, or to denounce the waste or misappropriation of public resources.

The women, confined as they are within highly unequal relations, struggle to achieve these goals, but some of their demands and challenges are successful. Moreover, through such encounters with the state, the women “learn the state”. This is probably the main, and most original, argument of the book. They gain experience with the tactics, strategies and practical know-how and know-how-to-be that are needed to approach the state. Given the great distance between the Indian state and its citizens—especially rural women, and particularly those from marginalised communities in whose case the distance is not only physical but also social and cultural—such a learning process is of particular importance.

In investigating both the neoliberal discipline promoted by SHGs and their role as spaces of interactions with the state, Kalpana takes a stand in the debate initiated by the, disputed, thesis of Partha Chatterjee (2004). Chatterjee argues that policies can reverse the effects of primitive accumulation resulting from the capitalist, neoliberal economy that India is experiencing at present. Kalpana’s findings confirm the criticism that has frequently been levelled against Chatterjee—the criticism of a confusion between policy intentions and policy outcomes. On paper, SHGs claim to provide safety nets and empower the rural poor. Kalpana concludes that in practice, however, although SHGs have been reappropriated in unexpected, unintended ways to democratise local political affairs and women have spent considerable energy to get the maximum out of them, their real impact has been fragile and minimal, in no way compensating for the vulnerability and inequalities rural women are exposed to.

Kalpana’s book is a welcome contribution to current debates on microfinance, not only in India but in other countries. The initial enthusiasm, or even euphoria, for microfinance as a “magic bullet”—as celebrated by the United Nations (2005 was declared the Year of Microcredit) and its consecration through the Nobelisation of Muhammad Yunus and the Grameen Bank (2006)—gave way to disillusion and bitterness. Microfinance was accused of all evils: of being a neocolonial and neoliberal tool in the hands of big capital, patriarchy and the West; of being the cause of the increasing informalisation and deindustrialisation of southern economies; and of leading to the dispossession of the poor. Then came the time of the randomistas, who used clinical trials to demonstrate, finally, the true effects of microfinance, asking whether microfinance works or not and bringing an end to such debate.

Microfinance is neither good nor bad; all of us use, and need, financial services and the same goes for the unbanked. It all comes down to what claims microfinance makes; its rhetoric on poverty alleviation and women’s empowerment has indeed been a masquerade. It also comes down to how, where and for whom it is implemented. A plurality of contexts and methods automatically leads to a plurality of outcomes. Kalpana’s work demonstrates well how crucial it is to contextualise any analysis or understanding of the effects of microfinance.

One might regret that the book comes a bit late: the SHG movement has lost some of its momentum. One might equally wonder how sustainable the “learning” process of SHG women and their acquisition of “state culture” will be. Although it is one of the book’s most innovative arguments, one might have expected more discussion of the conditions for such learning and the demands process: which groups can engage in such learning and demanding, under what conditions, and which cannot? Last but not least, it would have been interesting to situate the Indian SHG movement within a broader international context.

Despite the massive rise of commercial microfinance (as is observable in the growing presence of for-profit organisations and of private investment), microfinance state-sponsored schemes have not gone away, quite the contrary. It would have been helpful for the reader to learn to what extent Indian SHGs have common points with other state-sponsored programmes.

These brief reservations do not, however, detract from the fact that the book provides a sharp and convincing analysis of Indian microfinance SHGs and, more broadly, of the dubious alliances between state policies and neoliberalism.

Isabelle Guerin is a senior research fellow at IRD-Cessma in Paris and a research associate at the French Institute of Pondicherry.


Bastiaensen, J., P. Marchetti, R. Mendoza and F. Perez (2013): “After the Nicaraguan Non-Payment Crisis: Alternatives to Microfinance Narcissism”, Development and Change , Vol. 44, No. 4, pp. 861-885.

Chatterjee, P. (2004): Politics of the Governed: Reflections on Popular Politics in Most of the World , New Delhi: Permanent Black.

Karim, L. (2011): Microfinance and its Discontents: Women in Debt in Bangladesh , Minneapolis: University of Minnesota Press.

Rankin, K.N. (20011): “Social Capital, Microfinance and the Politics of Development”, Feminist Economics , Vol. VIII, No. 1, pp. 1-24.

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