Saving Money, Gaining Freedom: Women’s Microcredit Banking in India


I started working in the remote areas of western India in 1981 with the youth organization Chhatra Yuva Sangharsh Vahini, a nonpartisan group with a Gandhian philosophy. I still remember the incident that caused me to move from Mumbai (Bombay) to a village in Satara District of western India. Our group had organized a long march in the drought-stricken areas of the western region of Maharashtra. We visited villages, trying to understand the problems, and discussed solutions with the people. One woman reacted: “Why have you come here? You are studying and I am happy for your concerns for us, but can you see the mountains? Our problems are bigger than this. You are young, have lunch, go back to your college. Can you see this old man? His grandfather and father migrated in search of employment and even today we are migrating, our house is in this gunny bag, we have utensils and clothes in this bag, and education of our children is wound up [in this bag].”

I was little shocked. As activists, I considered it our responsibility to address problems, organize people, and get the problems solved. But I learned that people knew their own problems, were not ignorant, and had already tried to solve their problems collectively. In 1986, in search of answers, I moved from Mumbai to Mhaswad Village in the Satara District of Maharashtra. The literacy rate in the area was the lowest in India. Only 35 percent of women were literate, per capita income was less than $400 per year, and average rainfall in the area was six inches.

When I started working in Maharashtra, the Sangharsh Vahini group had a habit of trying to demand programs from the government and change policies through agitation, but we felt there was also the need to create and implement programs and ideas with the involvement of local people, and to create an institutional base for these programs. The first challenge, however, was finding funding. It was clear that projects should be self-reliant and the work not become dependent on donors. Sangharsh Vahini organized self-help group activities among women so they could get financial assistance and create employment opportunities near their homes and would not have to migrate and live in inhuman conditions as sugar cane thrashers or as construction workers in Mumbai.

First Rural Women’s Bank

We started self-help women’s groups and microcredit activity in 1992. It was clear that owning assets such as animals would help women increase their income; microcredit would increase their credibility. In the process of developing the microcredit program the main objective was to develop assets; women made it clear that they would save money and would like to get loans in the form of animals, such as goats and buffalo. They were concerned that if they were loaned money to buy the animals, their husbands would use the money to purchase liquor. Women insisted that any profit they earned from the program be used to improve the standard of living for their family.

It is not news that microcredit loans to women have a high recovery rate. The microcredit program was the first chance women had to earn money of their own; it was precious for them and they wanted to maintain their credibility. Social collateral was also important to the women. In the village, everybody knew if someone behaved irresponsibly, so the women were disciplined in financial matters because defaulting on a loan would bar them from membership in the self-help group.

The self-help group experience gave the women confidence. If they could run a microcredit program efficiently, they thought, why couldn’t they start a bank? Members of nearly 50 self-help groups decided to start the rural women’s bank. First, they needed share capital. They sent a proposal for the bank to the deputy governor of the Reserve Bank of India (RBI), who rejected the proposal outright because many of the women were illiterate. This rejection was a setback, and the women immediately called a meeting and all those who could not read or write attended regular classes. After one month the proposal was again given to the RBI, and the group of women contacted the deputy governor directly to ask for a personal appointment. About 35 women went to the RBI offices and insisted they be allowed to meet the deputy governor. When they were allowed to meet with him, the women challenged: “You ask us any calculation of interest and we can answer you.” The women convinced the deputy governor of the RBI and we obtained a banking license in February 1997.

On August 9, 1997, Mann Deshi Mahila Bank, India’s first rural women’s bank, opened for business. The institution’s main objective was to empower women, but it also had to compete as a bank. Why would people have confidence in a bank started by rural women? The first policy to address this challenge was a regular fortnightly meeting during which members and depositors developed the bank as a transparent institution. While advanced technology was used and the bank was computerized, unnecessary expenditures were avoided in order to become profitable in two years. Though profit making was not the goal, it was necessary to run the bank viably.

Most banks are designed for people in the government or organized sectors who receive monthly salaries. The women who use our bank work for daily wages and make weekly wages at the market day. Mann Deshi Mahila Bank’s credit and saving schemes are weekly and fortnightly instead of monthly. It uses social collateral instead of physical because most of the women are landless. Women told me that social collateral was also more effective because poor people are concerned about their credibility, which they cannot afford to lose, and therefore maintain regular loan repayment. The recovery rate of Mann Deshi Mahila is above 95 percent.

After starting the bank, self-help group activity was coordinated with that of the bank. For the smaller loans women met their needs through self-help group activity and for larger amounts they approached the bank. But in this case, each woman who draws a loan must have two other women from their group as guarantors, essentially making the self-help group collateral for the loan. The recovery rate of the self-help group is 98 percent. This recovery rate from women via microcredit lending provides a positive image of recovery in India, where the recovery rate for lending to women by the formal sector is less than 0.1 percent. More importantly, the women are able to develop their assets.

It is widely known that the poor need more than microfinance to address the causes and conditions of poverty. Coordinated combinations of microfinance and other development services would improve business income assets, health, nutrition, education, and social support services—especially in rural communities where other services are not available. It is often assumed that once people are economically sound they are automatically empowered, but this is usually not the case—especially in India where gender and caste are so significant. Women emphasized the need to take up social issues so they could improve their family’s living standard. Self-help group women felt the need for an anti-liquor campaign and, ready to fight, voted in a general meeting to have the bank and non-governmental organization Mann Vikas Samajik Sanstha take up the cause. They emphasized that if this issue was not dealt with it would be difficult for them to come out from the rut of poverty, as men would spend their earnings on alcohol. During the meeting, they decided that anyone in the village who drank would be fined and that illicit liquor dens would be closed with the help of police.

When women started getting credit from the microcredit project, they gained importance in their family as they took on the responsibility of paying back their loans. Therefore, they felt their families should make them equal partners with their husbands and give them shares in the family property. The question was about how they would make this happen. The women decided in a general meeting that when the bank sanctioned their loans, it would meet with their husbands and explain that, because the family would be getting the loan because of the women, the husbands would have to designate in writing that their wives were co-owners of the family’s property. Though women knew that their names would still not appear in the property papers, their husbands would not be able to sell land without their wife’s consent. A husband would also not be able to disassociate his wife or drive her out of the house because she would have rights in his property. Another important achievement is that women have stopped hiding their accounts, and openly admit that they earn and save so that they can help when their families are in need. Women in India traditionally saved money secretly with village shop owners and would take money from him whenever there was an urgent need. Many times, however, the shop owners would not give them money back, and because the women had kept their savings a secret, the shop owners could deny they ever had the money. The bank has successfully introduced to their villages’ cultures the concept that women control their own incomes.

Taking on New Projects

Once women had their new income, they wanted to spend more on education and health. In a survey, the bank found that in many cases families who faced a sickness like malaria could not get out of debt, even with loans. It was clear that freeing people from poverty required dealing with health issues. A proper drainage system and pure drinking water would curb the illnesses. In response, the bank and Sanstha started a health insurance scheme.

Under the insurance policy, members can save money for times of sickness. The bank pays the premium with interest earned on a seed fund provided by the women, and also manages to get a government subsidy to pay premiums. When a family member is sick, a woman does not have to take out loans to cover medical bills.

Adoption Programs

Elder women face vulnerability when they have to pay for medicine—especially landless laborer women who do not have assets and cannot earn wages. The bank has designed a scheme in which women can save money when they are 25 years old and get it at age 50, with the interest and partial interest as a pension. If a woman needs money for medicine and does not have money, the self-help group of that village adopts her and provides her medicine. A self-help group can only adopt one woman, but the problem is so grave that the bank and Sansha are asking other NGOs to partner in this program.

Another program gives girls opportunities to further their education. In rural areas, parents do not want to invest in girls’ education. Students can attend schools in their villages through the seventh grade, but then they must go to the neighboring main center; if communication is not available, parents do not allow their daughters to go away to school and keep them at home to care for the family. The federation of several self-help groups has created a program to adopt girls in villages and give them bicycles to make transportation to school easier and reduce the dropout rate.


Now women in Maharashtra do not have to approach money lenders, as they can get credit at a low rate of interest that they could never get before from other banks or credit institutions. The main outcome is they have gained confidence—they have vision for their future, which results in planning for their future. Women are respected by their families and communities and have become financial advisers. ”Now we have started thinking about ourselves and giving importance to us!” women have said.

“We never used to think of ourselves but only for the children and the family,” one woman said. “But now we should be healthy, we should spend on our health.” In the annual general meeting, the women unanimously recommended that NGOs in the area focus their work on education for children.

These achievements do not mean there are no disappointments. Along with women’s increased responsibility comes more work—they must manage the house and finances, plan for the future, and do other daily tasks. We are not creating superwomen—we want men to share the responsibilities.

Chetna Sinha was born and raised in Mumbai and now lives in Mhaswad Village. She taught economics at Women’s University before becoming active in the farmers movement, partly influenced by her husband, who is a farmer and has also been active in the farmers movement.

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