Access to Microfinance, Female Empowerment and Fertility in Urban India

This study evaluates the impact of access to microfinance on female labour force participation and childbearing in the long-term.

Microfinance is key to greater participation of women in the labour force. The past two decades have witnessed a rapid increase in the availability of microfinance loans to female entrepreneurs in South Asia. Greater access to formal loans allows formerly credit constrained individuals to expand or start small businesses, thereby increasing household income. Short-term experimental evaluations have pointed towards a lack of significant impact of microfinance on women in terms of empowerment and other economic benefits. This study constitutes the first rigorous investigation of the long-term causal effects of credit access on female labor force participation. the study took advantaged of its long-term nature to also explore impact of access to microfinance on an understudied aspect – fertility.

Conducted in collaboration with Shri Mahil Self-Employed Women’s Association (SEWA) Bank, the study was set in the city of Ahmedabad in Gujarat, India. The study employed two rounds of household surveys among its targeted sample which comprised of 3,676 respondents. The first round of survey collected socio-economic characteristic information for the respondents in both 2009 and 1999. The second round of surveys was conducted in 2014-2015. In addition to the primary data source, the study also derived from two complementary sources of information:
(1) Residence history and socio-economic information of all individuals who have worked for SEWA bank as loan officers in the period 1999-2015.
(2) Secondary administrative data from SEWA, which includes savings and loan transaction records.
Detailed geographic locations of clients and collection officers allowed us to construct a quasi-random instrument of access to micro-credit.

The results provide evidence that access to microfinance increases rates of female labor force participation and women’s share of household income, though it had negligible impact on total household income. The study also found that changes in the female labor force participation and the household earnings shares following microfinance access were associated with large reductions in the number of children in the household.
Given these results, a second round of follow-up data is being undertaken. This data focuses on demographic and reproductive outcomes, as well as more concrete measures of decision-making power within the household. The outcomes of interest are total fertility (gathered through reproductive histories), demand for children by both husbands and wives, and female decision-making power. This will enable the researchers to build on their previous impact evaluation and test whether changes in labor force participation and household earnings shares that result from greater access to microfinance loans are also associated with reductions in fertility and increases in female decision-making power within the household.

Thematic Area

Financial Well-being and Social Protection,

Health Systems and Quality of Life

Project Leads

Erica Field, Rohini Pande, José Martinez