‘Inclusivity’ in Welfare-Oriented Microfinance: Lessons From Kudumbashree in Kerala, India

Purpose: This study contributes to the literature on the inclusivity of microfinance, by examining non-participation in Kudumbashree, a welfare-oriented microfinance initiative in Kerala, India, through the lens of social exclusion. Study Design: The study integrates both quantitative and qualitative data. A survey was conducted among 678 rural poor households in Kerala, supplemented by in-depth interviews and focus group discussions. Findings: Despite the programme’s provision of financial and non-financial benefits, women from the most marginalised backgrounds encounter certain barriers in participating in Kudumbashree, leading to passive/implicit exclusion. The observed positive association between participants’ debt attitudes and their likelihood of continued engagement in the programme, highlights the role of financial incentives in enhancing retention rates of welfare initiatives. Contributions: This paper offers several policy insights for improving the inclusivity of microfinance programmes. Conceptually, it highlights the paradox that policies designed to combat social exclusion may unintentionally reinforce it. The paper argues that institutional exclusion in social protection schemes—where participation is voluntary and conditional—can manifest implicitly through the interplay of three factors: design-stage conditions, their operational-stage enforcement, and individual-level limitations in meeting them. Implications: To enhance participation in welfare-oriented microfinance programmes, targeted awareness sessions fostering group solidarity and team cohesion are recommended.