Integrating Women into Development through Microenterprise Approach in Rural Areas: Role of Microfinance in Sri Lanka
Poornima Gayangani Wasana Jayawardana, Ritsumeikan Asia Pacific University
Promoting entrepreneurship through microenterprise approach has been recognized as the solution for incorporating women in development into the overall economic development process in many developing countries whereas Sri Lanka is one such developing economy in South Asia (Jayaweera, 2010). Microenterprises mainly focus on developing and utilizing the entrepreneurial skills and potential of rural women below poverty line to meet local needs (Kaushik & Rengarajan, 2010). Hence, women can play a crucial role in the area of rural development as entrepreneurs ultimately leading to the social and economic development of the country.
Although it is often stated that the development of women entrepreneurship should be part of the women’s empowerment efforts in developing countries (Tambunan, 2009), women often faces various constraints in starting up and expanding their microenterprises. As in many other countries, access to finance has been recognized as one of the greatest obstacles faced by women entrepreneurs in rural areas of Sri Lanka as they are severely disadvantaged in the credit market due to lack the autonomy to establish reputations for creditworthiness (Collier, 1988; Tambunan, 2010).
Given that, providing affordable financial services to the poor has been an important component of inclusive development in most developing countries, where microfinance has been emerged as an effective mechanism in advancing functional financial markets in rural setting and can be considered as the most fruitful process for promoting microenterprises among women (Yaron, Benjamin, & Charitonenko, 1998; Thankom, 2005; Fayolle, 2007).
However, there are large disparities among findings of studies that have attempted to explore the effectiveness of microfinance in contributing women’s entrepreneurship and thereby economic empowerment. Although studies highlight positive impacts of microfinance in supporting women entrepreneurs further studies indicate that it has very limited effects on promoting self employment (Fayolle, 2007; Guerin, 2010).
This study attempts to provide an insight into this debate by analyzing the capabilities of microfinance programs in promoting microenterprises and thereby economic empowerment among women in a rural community in Sri Lanka with a case study of Samurdhi program; the largest microfinance provider in the country.
The analysis in this study draws on the primary data collected during the fieldwork in Ihala Koswaththa village of Sri Lanka during September 2007 and 2010. The study is qualitative in nature and data collected through in depth interviews with individual Samurdhi program beneficiaries, small groups, Samurdhi field officers, village officer, and informal interviews and observations made by visiting beneficiary households, weekly Samurdhi group meetings and monthly meetings of Samurdhi societies during the fieldwork. The respondents were selected through purposive sampling by selecting information rich cases on the basis of theoretical saturation, and the interviews of Samurdhi microfinance clients were conducted with the married middle aged poor women in the village
A key assumption of microfinance interventions is that increasing women’s access to credit will enable them to set up microenterprises or strengthen their existing income generating activities. This in turn expects to empower women economically through increased incomes under their control ultimately leading to their improved well being and socio political empowerment as well (Mayoux, 2006). The study findings highlight that Samurdhi program has limited impact on promoting microenterprises among rural women mainly due to the diversion of loan utilization for other purposes, despite its main objective of ensuring recipient participation in the production process by increasing access to resources for self employment. The program should foster women’s confidence in microenterprises while approving enterprise loans only for viable economic activities and ensuring effective monitoring of credit disbursement and utilization along with other supporting services for actively promoting entrepreneurship and thereby empowerment among these women that will enhance the life and economy of rural society.
As in many other developing countries, poverty is largely a rural phenomenon in Sri Lanka. Therefore, enhancing the economic livelihood of rural population is extremely important in reducing overall poverty aspects of the country. As women’s empowerment through microenterprise development enables eradicating the rural poverty in developing economies to a larger extent, this study focuses towards enhancing the effectiveness of microfinance approaches assisting women in rural communities and promoting their meaningful participation in development. Therefore the individuals and organizations interested in recognizing factors that may involve in effective rural microfinancing for microenterprise development and empowerment among women, and responsible for policy making for development of human resources in rural Asia, can benefit from the empirical findings of this study, although further empirical evaluations are needed in replicating the findings in different contexts.