Poor economic status, low level of education, societal conventions are the major reasons of women disempowerment and are considered as burning issues in the developing countries all over the world. Despite the number of challenges faced by disadvantaged women, microfinance is an effective and powerful instrument towards empowering women.

Women entrepreneurs are the key contributors to the economic growth worldwide. However, the majority of women in developing countries lack power. Women in these countries are struggling to make ends meet. They handle a large part of the work in the world, but the benefits they receive on behalf of their service are minimal. Statistics from the World Bank shows that women poverty in developing countries is higher than men living in these countries. The roles of men and women in the household are determined by societal norms.  For instance, in poor countries, women are expected to take responsibilities of child rearing and look after the welfare of their family. These responsibilities have a negative impact on women’s ability to start their business.

Furthermore, women are underrepresented and excluded from finance across the developing countries. The access to finance is disproportionately low for women. Facts from the World Bank, outlines that 1.2 billion more people have a bank account compared to 2011. Still, there is a gap between women’s and men’s access. This has also been seen widened in Sub Saharan Africa where only 37% of women have a bank account compared to 48% of men. This is because, banks are not designed for the low income segment.  With modest funds and no credit history, they are expensive to serve in the traditional banking channels. Thus, they are being categorised as low potential people. This is where the poor turns to alternative financial services.

As women constitute a greater proportion of the poor population, microfinance institutions preferentially target women in the provision of loans. As microfinance has grown in popularity, women have generally proven to be better borrowers than men. In other words, women are more likely to repay loans on time and invest the money in their businesses, children’s education and family welfare. When considering financial inclusion, it is clear that microfinance is primarily contributing to women’s empowerment in developing countries. Empowering women economically can lift entire families and communities out of poverty. Offering micro loans has become the best possible solution, micro finance institutions have come up with credit scoring to make credit lines for the underserved faster, cheaper and credit worthy. As mentioned above, women have historically faced discrimination in lending decisions. Credit scoring data can be extremely beneficial to female entrepreneurs who are frequently denied to credit due to lack of information.

Microfinance is one of the ways that has helped in building the capacities of the poor and their ability to become self-employed. Microfinance programmes that has targeted women has been able to bring them into leadership position and have also played an important role in helping women out of poverty. The positive impact of microfinance has been considerable in bringing confidence, courage, skill development, and empowerment in the women community. Finally, female empowerment has played and will continue play a crucial role in poverty alleviation and economic growth.