Microfinance and micro-enterprises: A study of the Kudumbashree Program in Kerala, India.

The poverty eradication mission called Kudumbashree is a women-centered anti-poverty program initiated in 1998 by the Government of Kerala, in India. Based on a primary survey of neighborhood groups in two communities, the study examines the dynamics of high repayment rates and the social impact of this micro-enterprise program. The study found that repayment rates are relatively lower in non-agricultural activities because of the marketing problems (resulting from the creation of non-tradables), while it is relatively successful in the agricultural sector. High repayment rates are found to be propelled by dynamic incentives like subsidies and the prospect of loan renewal. Finally, the study found that borrowers did considerable double-dipping (borrowing from other microfinance programs) and borrowed from non-institutional sources. This raises questions about their real indebtedness. Kudumbashree's real impact could be found in its social capital impact. It creates considerable social interactions among the poor and facilitates women's empowerment. Peer monitoring and peer mentoring interactions among the members of the group create positive externalities - a common knowledge pool and social safety nets. It is able to leverage these externalities with local governments, which enables women to exert influence in their communities' political power structures.