Microfinance and the Paradox of Empowerment: Psychological Costs among Ugandan Market Women
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Abstract
Microfinance is widely promoted as a mechanism for poverty alleviation, financial inclusion, and women’s economic empowerment. However, dominant evaluations of microfinance tend to privilege measurable financial outcomes, with comparatively limited attention to the psychological costs that may accompany women’s participation in credit-based financial systems. This study examines the psychological dimensions of microfinance participation among market women in Uganda, focusing on how debt obligations, repayment pressures, social expectations, and institutional practices shape women’s experiences of well-being and agency. Informed by empowerment theory, feminist economics, and social capital theory, the study adopts a qualitative approach to explore women lived experiences of microfinance participation. The findings reveal a paradox of financial empowerment: while access to credit can enhance women’s financial resources, income-generating capacity, and participation in household and market economies, it can simultaneously generate psychological burdens, including stress, anxiety, emotional exhaustion, and constrained autonomy. These experiences are intensified by irregular income, rigid repayment structures, social obligations, and the pressure to sustain repayment despite economic uncertainty. The study contributes to the microfinance and women’s empowerment literature by demonstrating that financial inclusion should not be understood as synonymous with empowerment. Rather, empowerment is multidimensional and may coexist with forms of psychological vulnerability and constraint. The study therefore calls for a broader assessment of microfinance outcomes that incorporates psychological well-being, agency, and the social conditions within which financial inclusion is experienced.
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