Even before the Beijing Platform for Action identified access to credit as a critical contributor to women’s economic empowerment, microcredit – defined as credit for the poor without collateral – was established as a mainstream development intervention. Even before Mohammad Yunus, who started with an experimental project in Chittagong, established its Grameen Bank in 1983, several NGOs had taken up micro-credit as a central strategy. Fuelled by the World Bank-sponsored microcredit summits, the credibility of microcredit has grown to the point where it is being hailed as the ultimate answer to poverty and underdevelopment. To its proponents, micro-credit has everything – participation, flexibility, community ownership and, best of all, women’s empowerment. To its critics, it is a Band-Aid solution to poverty, an easy way of side-stepping structural issues and making the poor responsible for finding solutions to their own problems.

In India, organisations like SEWA in the early 1970s, and Annapurna Mahila Mandal and the Working Women’s Forum in the 1980s, demonstrated the feasibility of small loans to poor women, primarily to support small entrepreneurial ventures. Today, almost every NGO worth the name runs a micro-credit programme, and major donors including the national financial institutions are involved. The World Bank has set a target of reaching 100 million of the world’s poorest people with microcredit by 2005, and has placed microcredit at the centre of its global strategy for poverty alleviation.

In India, a total of 35,000 women’s "self-help groups" are reported to have credit linkages with banks through microcredit schemes. These groups have been initiated by NGOs, sometimes with support from national schemes such as the Rashtriya Mahila Kosh, the Indira Mahila Yojana and poverty alleviation programmes, or from bilateral and multilateral donors including the UN agencies and the World Bank. In certain States, most notably Andhra Pradesh, women’s self-help groups, the majority initiated under DWCRA, are now the vehicle of choice for the implementation of all major government programmes at the village level.

The microcredit approach is premised on some assumptions about the poor – that they are honest, that they do not shirk from repaying their debts, that they are willing to lend to each other and that they can assume responsibility for each other. The success of the approach has validated these assumptions many times over. Self-help groups of 15-20 persons, usually women are organised at the neighbourhood level. These groups meet regularly to save – usually small amounts of Rs.5-10 a week – and circulate their savings as low-interest loans within the group whenever a member needs a loan. Loans are usually taken for small enterprises, which, to judge from loan repayments, have a very high success rate. Repayment rates and terms are decided by the members and are highly context-specific. For most schemes, repayment rates are over 90% - far higher than the figures for formal banks. While each NGO has introduced minor variations (extensively documented as "best" practices), the basic outline of the approach is the same all over the world.

Discussions at a conference organised by six national women’s organisations following the Global March 2000, and attended by representatives of over eighty grassroots women’s groups and networks, reflected mixed feelings on the issue of microcredit.

On the one hand, most grassroots organisations were unequivocal in endorsing the strength of the "self-help" savings and credit movement of grassroots women. Millions of poor women, struggling to make a living through home-based enterprises or tiny initiatives in the informal sector, desperately need small amounts of credit to break their dependence on middlemen. The availability of credit without collateral on easy terms has enabled these enterprises to survive. Similarly, small loans from self-help groups for emergencies – doctor’s bills, school fees, repair of huts, marriages – have helped women to escape from moneylenders. Every self-help group can cite instances where women have used loans to repay earlier loans taken from moneylenders and to redeem mortgaged assets.

Women’s groups and NGOs also acknowledged the potential of microcredit as a platform for organisation-building through intervention in the everyday struggles of poor women. The neighbourhood-based and decentralised mode of functioning of these groups is conducive to women’s participation. Self-help groups have colonised spaces available to women within patriarchal social structures. Many self-help groups have moved beyond their initial agendas of savings and credit, to become genuine grassroots organisations, willing and able to take collective action to challenge vested interests.

However, national women’s organisations also voiced their concern about the manner in which microcredit is being promoted as a panacea for poverty. It was pointed out that "success", for both government and NGOs, is gauged by the amount of money saved, the size and frequency of loans and the rate of loan repayment, rather than by the extent to which the economic exploitation of women has been reduced. There are practically no rigorous studies of changes in the income and expenditure patterns of members of SHG’s before and after they take up economic activities using microcredit. Similarly, there are very few studies that explore the extent to which microfinance programmes have been able to facilitate non-economic dimensions of empowerment for women members of SHGs.

Organisations working with landless agricultural workers – who comprise the majority of poor women – have pointed out that their priorities are land and regular wage work, rather than setting up a microenterprise – in many cases, merely assuring payment of the minimum wage can result in doubling of the family income. Also, the success of microcredit and microenterprise depends on a range of variables including market access, levels of family assets and risk-taking capacity – all of which exclude the "core" poor. Evaluations have confirmed that self-help groups tend to exclude the poorest women in any community, both because of their inability to save and because the other members see them as bad credit risks.

Women’s organisations participating in the Global March 2000 linked the promotion of microcredit and micro-enterprise projects by large multilateral and bilateral donors with their efforts to provide safety nets for women as part of the "human face" of globalisation. Organisations working with handloom weavers point out that, as part of the economic restructuring package, government is retreating from providing support in the form of subsidies on raw materials and marketing assistance to co-operatives of traditional artisans. Experience shows that this is precisely the support needed by SHGs, whether from the government or from a well-connected NGO. With government policies favouring the entry of multinationals into the rural market, these groups question the extent to which SHGs can provide a viable base for rural entrepreneurship.

Grassroots women’s groups also expressed concern about the tendency of donors to piggyback their microfinance interventions on already existing groups, thus reducing costs and co-opting the work of smaller integrated programmes. In their eagerness to promote financially viable and minimalist interventions, donors are glossing over the contradictions emerging in microfinance programmes, and are making unjustified assumptions about the "empowerment outcomes" of these programmes.