Introduction 

Microfinance as a formal structure started in the 1970s in Bangladesh  with the establishment of the Grameen Bank by Muhammad Yunus. The bank wanted to provide small funds to impoverished individuals, especially women, to start their own micro-entreprises.[1] Initially, the bank offered microloans, which were debt-based loan opportunities that allowed women to access traditional banking systems. However, with the evolution of microfinance, microgrants arose as a means to avoid indebting already vulnerable populations. Since then, microfinance has expanded globally, offering small loans or grants to individuals who lack access to traditional banking systems, functioning as a tool for economic empowerment, particularly for women in developing economies. Microfinance has proven instrumental in fostering entrepreneurship, increasing financial independence and inclusion, and uplifting entire communities, helping women break cycles of poverty.[2] However, the success of microfinance in promoting gender equality rests on a limited and exclusionary definition of womanhood, one that often fails to account for the lived experiences of transgender women.

 

This paper examines the exclusion of trans women from microfinance initiatives in India by analyzing the legal and cultural frameworks that reinforce their marginalization. The paper also highlights the urgent need for inclusive financial policies that recognize and address the unique challenges faced by trans women. This paper will ultimately argue that true economic empowerment cannot be achieved without reforming the exclusionary structures that continue to deny trans women access to financial independence.

 

Literature Review

A critical understanding of how gender, sexuality, and identity work together is necessary to understand the exclusion of trans women from these frameworks. Kimberlé Crenshaw’s theory of intersectionality forms the analytical foundation for understanding how gender interacts with other aspects of one’s identity.[3] Originally created to highlight the erasure of Black women's experiences within both feminist and antiracist legal frameworks, Crenshaw’s intersectional analysis reveals the implications of relying on single-identity categories, such as "woman." Rather than viewing identity categories as additive, Crenshaw emphasizes that oppression is co-constitutive, meaning that experiences of racism, casteism, elitism, sexism, or transphobia cannot be detached from one another. I will apply the context of intersectionality for the case study of trans women in India by explaining how casteism, elitism, and transphobia work together, in order to explain the exclusion of trans women from microfinance. In other words, Crenshaw’s framework demands an approach where inclusion does not translate to adding trans women to existing programs. Instead, she emphasizes that the definition of “womanhood” must be entirely rethought. Hence, intersectionality not only serves as a framework for identity, but more critically, as a framework for understanding power within existing structural frameworks.

 

Additionally, Dean Spade’s “Normal Life: Administrative Violence, Critical Trans Politics, and the Limits of Law" builds on the idea of oppressive systems by exposing how legal recognition and administrative work frequently reinforce existing inequalities for individuals. Spade argues that the legal system can often promote “administrative violence”, where institutional practices perpetuate harm through processes like gender markers, ID systems, and welfare eligibility.[4] This form of violence is not overt but embedded in everyday life. It disproportionately harms people of marginalized backgrounds, including low-income individuals, people of color, and gender diverse people. Applying Spade’s theory to the context of microfinance in India, trans women are often excluded not because they lack entrepreneurial potential, but because they do not fit neatly into the gender and legal categories used by institutions. Hence, these limitations of law need to be addressed in the search for transformative justice. To understand how this exclusion occurs, it is important to explain the procedures and structures within the microfinance field.

 

Financial Inclusion 

Financial inclusion is defined by the World Bank as when individuals have “access to and use affordable financial products and services that meet their needs.”[5] These services include, among other products, traditional banking services, such as transactions, payments, savings, loans, credit and insurance. According to the United Nations, financial inclusion is a key component of sustainable development, as it contributes to economic stability, poverty reduction, and the empowerment of underserved communities by integrating them into formal financial systems.[6] However, the World Bank's 2018 report estimated that 1.7 billion adults worldwide remain unbanked, with women and rural populations disproportionately affected. Gender disparities in financial access persist, with a 9% gap in account ownership between men and women globally.[7] For instance, the Center for LGBTQ Economic Advancement & Research (CLEAR) and the Movement Advancement Project determined that there are other factors that feed into economic instability of the LGBTQ+ population, outside of disproportionately lower wages. Particularly, the executive director of CLEAR highlighted that:

 

Twenty-three percent of LGBTQ+ respondents to the survey said that they do not have a checking or a savings account. That high number of “unbanked” people is linked to deeper disenfranchisement for LGBTQ+ people who work in cash-based economies and have been excluded from basic financial services.[8]

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Transgender individuals are disproportionately impacted by this disenfranchisement, according to Tori Cooper, who leads community engagement for the Transgender Justice Initiative at the Human Rights Campaign. She further noted that lacking access to banking services can often indicate unstable employment or extremely low income.

 

A survey about the experiences of LGBTQ+ people in the United States, conducted by NEFE, an organization committed to financial education, found that approximately two in five (36%) participants felt “blocked or discouraged from engaging with financial services and products due to barriers or discrimination in how financial services are designed, marketed, or offered (e.g., fee structure or application/approval requirements).[9] There is a clear relationship between queer economic security and limited access to banking or financial services stemming from discrimination, bias, or disproportionate financial literacy. Therefore, financial inclusion goes beyond simply owning a bank account, but extends to  reducing the structural barriers to access financial services for minority populations. 

 

Efforts of Microfinance in India 

In India, where financial literacy among adults remains at 27% (and 24% of women), over half the population still lacks access to formal financial services (World Bank, 2017).[10] Efforts like India's Pradhan Mantri Jan Dhan Yojana (PMJDY), which opened over 380 million zero-balance accounts, have helped expand financial access. And yet, gaps remain–especially among vulnerable groups, such as women, rural populations, and transgender individuals. [11]

 

Despite the Reserve Bank of India’s mandate to include a third-gender category in banking applications, many transgender individuals in India remain unbanked due to procedural complexities and societal stigma. Financial inclusion initiatives tailored to transgender communities, including microloans, targeted savings programs, and financial literacy campaigns, could significantly enhance their economic security and social mobility. The plan to create bank accounts digitally have also helped many queer and trans people avoid bias and have access to a bank account. However, structural discrimination that leads to limited job opportunities and disproportionate low-wages of trans and queer people still does not allow them to access traditional banking services. As such, microfinance institutions (MFIs) have the opportunity to play a crucial role in uplifting the trans community. 

 

Odisha Case Study

According to a survey conducted by Barik and Sharma, 42.11% of the trans community in Odisha, India was not aware of MFIs and SHGs. Moreover, Only 1.32% reported borrowing from MFIs and SHGs. Among the issues reported, 23.68% mentioned lack of awareness, 11.68% lack of cooperation, 13.15% lack of proper guidance, and 39.47% lack of proper documentation.[12] 

 

Lack of proper documentation appears to be one of the biggest reasons that exclude people from microfinance services. It is related to India’s legal framework for trans documentation. India’s legal recognition of transgender rights has evolved significantly, particularly through the landmark National Legal Services Authority (NALSA) v. Union of India (2014) case. In this ruling, the Supreme Court of India officially recognized transgender individuals as a “third gender” and upheld their right to self-identify their gender, whether as male, female, or third gender. The Court emphasized that gender identity is a fundamental right under the Indian Constitution, particularly under Articles 14 (right to equality), 15 and 16 (prohibition of discrimination), 19 (freedom of expression), and 21 (right to life and dignity). This decision was seen as a major step in securing human rights for transgender individuals in India.

 

Following the NALSA judgment, the Transgender Persons (Protection of Rights) Act, 2019 was enacted to provide a legal framework for transgender rights.[13] The Act prohibits discrimination against transgender people in education, employment, healthcare, and housing. Nonetheless, it has faced criticism, as there is a two step process for trans people to be legally recognised. To begin with, individuals must obtain a “transgender certificate” from their local District Magistrate, based solely on self-identification. If they wish to officially change their gender to male or female, they must undergo a second application process. This process requires submitting medical proof of gender-affirming surgery, certified by a hospital official, to the District Magistrate. The magistrate then evaluates the documentation and has the discretion to approve or deny the request based on their judgment of its validity.[14]  This contradicts the principle of self-identification upheld in the NALSA judgment and creates bureaucratic difficulties that exclude many trans people. 

 

Cultural norms in India contribute to this lack of cooperation. The hijra community, often recognized as India's "third gender," holds a unique position deeply rooted in the country's cultural and religious norms. The marginalization of hijras cannot be fully understood without accounting for the historical shifts in their social status from the pre-colonial to the post-colonial period. Prior to British colonial rule, hijras held complex and often revered roles within South Asian societies. This dynamic was especially true in Mughal courts where they served as spiritual figures, guardians of harems, and bearers of ritual significance. Hijras have also been historically associated with Hinduism, performing blessings during childbirth and weddings, reflecting their perceived connection to fertility and luck.[15] 

 

However, British colonialism imposed Victorian norms of binary gender and sexuality through legal and administrative reforms that pathologized and criminalized hijra existence. The Criminal Tribes Act of 1871, which categorized hijras as a “criminal caste,” institutionalized their marginalization and stripped them of formal recognition and protection.[16] This colonial legacy persists in contemporary cultural and institutional frameworks in India, where hijras continue to face exclusion and cultural stigma. Gayatri Reddy’s ethnographic work With Respect to Sex offers a critical cultural context for understanding how hijra identity is negotiated within both societal and institutional frameworks in South India.[17] As Reddy demonstrates, these exclusions are both remnants of cultural bias and structurally embedded in how gender is administratively categorized and economically valued. This observation challenges the assumption that legal recognition alone can rectify the marginalization of trans people. By highlighting how gender and sexuality are locally constructed and policed, Reddy’s work complicates efforts to include trans women through standardized institutional mechanisms that fail to recognize the fluidity and contextual specificity of hijra identities. Thus, any effort to include trans or hijra individuals in development initiatives must take into consideration the colonial legacy that continues to shape access to rights, recognition, and resources.

 

The social challenges confronting the hijra community are profound. Many people resort to traditional roles in ceremonies, begging, or sex work to sustain themselves due to limited access to education and employment opportunities. According to the study “Inclusive Approach: Hijra/Transgender Community” that 48% of hijra participants suffered from psychiatric disorders, including depression and substance abuse.[18] Nonetheless, none had sought psychiatric consultation, often due to anticipated stigma from healthcare professionals. The COVID-19 pandemic exacerbated these vulnerabilities, with reports of increased misinformation and prejudice against hijras, including wrongful blame for virus transmission and eviction pressures from landlords. Despite legal advancements, including the 2014 Supreme Court ruling recognizing hijras as a third gender and granting them certain rights, societal acceptance and integration remain significant hurdles. 

 

Apart from social marginalization, a lack of awareness of resources to the community further contributes to the systemic failures in outreach and inclusion. These failures suggest that programs are not being communicated in ways that are accessible or visible to trans communities. Without intentional, targeted efforts to increase awareness, such as inclusive marketing, outreach through trusted community networks, and collaboration with trans-led organizations, MFIs and Self Help Groups (SHGs) will continue to fall short of their goal to empower marginalized populations. 

 

These three main issues that the participants highlighted in the survey, namely the lack of cooperation, lack of documentation, and lack of awareness are not isolated failures but consequences of how microfinance programs have historically operationalized "women" as a homogenous category. Trans women and other gender-diverse individuals often fall outside the normative definitions that these programs were designed for. Rather than addressing inclusion through an additive model that simply tacks on marginalized identities to existing frameworks, there is a critical need for co-constitutive approaches that rethink the very foundations of how gender and identity are constructed within development policy. A holistic solution must therefore begin with rethinking eligibility, outreach, and engagement criteria from the ground up. 

 

To address lack of cooperation among MFIs and trans individuals, as well as lack of proper documentation MFIs must engage in deep community partnerships with trans-led organizations and local leaders. These partnerships can foster trust, combat stigma, and help reframe financial inclusion as a collective good. Regular sensitization workshops for MFI/SHG staff and community members are essential, not just for tolerance, but for transforming cultural attitudes and power dynamics. To overcome documentation barriers, institutions should advocate for policy reforms that recognize self-identified gender in official records and offer alternative documentation pathways (e.g., community-issued ID cards). In the meantime, MFIs can adopt flexible verification mechanisms, drawing from community-based models of trust and reputation that already operate informally within many marginalized groups. 

 

Lastly, to counter lack of awareness and guidance, MFIs and SHGs must specifically target transgender women in their outreach strategies by co-developing campaigns with trans communities rather than simply targeting them as passive recipients. Information must be linguistically and culturally accessible, and disseminated through trusted channels, such as peer educators, community health workers, or cultural events. Ultimately, true financial inclusion requires challenging the foundational assumptions of gender that underpin policy design. A co-constitutive perspective does not merely “include” trans people but reimagines womanhood itself in ways that recognize how gender, caste, class, and legal status are mutually shaping. 

 

Conclusion 

While microfinance has been widely recognized as a tool for women’s empowerment, its frameworks often exclude transgender women due to rigid definitions of gender, legal recognition barriers, and deeply embedded social hierarchies. The exclusion of transgender women from microfinance schemes highlights a deeper issue within development practice: the assumption that categories like "woman" are universally understood and experienced. True inclusivity demands a reimagining of development strategies that center lived experiences rather than top-down definitions. Future initiatives must actively engage with marginalized gender identities and consult with trans communities to co-create financial tools that address their specific needs. This not only ensures more equitable access but also challenges the very foundations of exclusionary economic systems, offering a path toward genuinely transformative development.

 

Endnotes

1. “A Pioneer in Microfinance.” Grameen Bank, 1 July 2024, www.grameen-info.org/grameen-bank-a-pioneer-in-microfinance/. 

2.  Milana, Carlo, and Arvind Ashta. Microfinance and Financial Inclusion: Challenges and Opportunities, Strategic Change, 2020, www.researchgate.net/publication/313553041_Microfinance_and_Financial_Inclusion. 

3. Crenshaw, K. “Demarginalizing the Intersection of Race and Sex: A Black Feminist Critique of Antidiscrimination Doctrine, Feminist Theory and Antiracist Politics.” The University of Chicago Legal Forum, 1989, https://www.scirp.org/reference/referencespapers?referenceid=3090577.

4.   Spade, Dean. Normal Life: Administrative Violence, Critical Trans Politics, and the Limits of Law , Duke University Press, 2015, www.jstor.org/stable/j.ctv123x7qx. 

5.  “Financial Inclusion.” World Bank Group, www.worldbank.org/en/topic/financialinclusion/overview. Accessed 9 May 2025. 

6.  Sharma, Upasana, and Banajit Changkakati. “Dimensions of Global Financial Inclusion and Their Impact on the Achievement of the United Nations Development Goals.” Borsa Istanbul Review, 3 Sept. 2022, www.sciencedirect.com/science/article/pii/S2214845022000631. 

7.  “Financial Inclusion on the Rise, but Gaps Remain, Global Findex Database Shows.” World Bank Group, 23 Apr. 2018, www.worldbank.org/en/news/press-release/2018/04/19/

8.  Jones, Jeffrey. “LGBTQ+ Identification in U.S. Rises to 9.3%.” GALLUP, 2025, news.gallup.com/poll/656708/lgbtq-identification-rises.aspx. 

9.  Hensley, Billy. “HOW LGBTQIA+ Representation Assures Better Data.” NEFE, 2020, www.nefe.org/news/2022/07/how-lgbtqia-representation-assures-better-data.aspx. 

10. “In India, Financial Literacy Programs Are Lifting Families Out of Debt and Fueling New Prosperity”, Asian Development Bank, 2022, www.adb.org/results/india-financial-literacy-programs-lifting-families-out-debt-fueling-new-prosperity. 

11.   Pradhan Mantri Jan-Dhan Yojana , Department of Financial Services, Ministry of Finance, pmjdy.gov.in/. Accessed 9 May 2025. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2049231.

12.  Barik, Rajesh & Sharma, Pritee. “Exclusion of Transgender from Microfinance Market: Field Study from Odisha, India.” Journal of Exclusion Studies, 2018, https://www.researchgate.net/publication/327015920_Exclusion_of_Transgender_from_Microfinance_Market_Field_Study_from_Odisha_India

13.  “Transgender Persons (Protection of Rights) Act, 2019.” South Asian Translaw Database, 14 Oct. 2021, translaw.clpr.org.in/legislation/transgender-persons-protection-of-rights-act-2019/. 

14.  Knight, Kyle. “India’s Transgender Rights Law Isn’t Worth Celebrating.” Human Rights Watch, 28 Oct. 2020, www.hrw.org/news/2019/12/05/indias-transgender-rights-law-isnt-worth-celebrating. 

15.  “The Third Gender and Hijras: Religion and Public Life.” Harvard University, 2018, rpl.hds.harvard.edu/religion-context/case-studies/gender/third-gender-and-hijras. 

16.  Criminal Tribes Act, 1871, Union of India, indiankanoon.org/doc/17412906/. Accessed 9 May 2025. 

17.  Reddy, G. (2005). “With Respect to Sex: Negotiating Hijra Identity in South India.” University of Chicago Press.

18.  Chaturvedi, Ruchi Dubey, et al. Inclusive Approach: Hijra/Transgender Community, Indian Journal of Mental Health, 2018, www.indianmentalhealth.com/pdf/2018/vol5-issue3/Original_research_article_81-87.pdf. 

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Bibliography

Chaturvedi1, Ruchi Dubey, et al. Inclusive Approach: Hijra/Transgender Community, Indian Journal of Mental Health, 2018, www.indianmentalhealth.com/pdf/2018/vol5-issue3/Original_research_article_81-87.pdf.

Criminal Tribes Act, 1871, Union of India, indiankanoon.org/doc/17412906/. Accessed 9 May 2025.

“Financial Inclusion on the Rise, but Gaps Remain, Global Findex Database Shows.” World Bank Group, 23 Apr. 2018, www.worldbank.org/en/news/press-release/2018/04/19“Financial Inclusion.” World Bank Group, www.worldbank.org/en/topic/financialinclusion/overview. Accessed 9 May 2025.

Hensley, Billy. “HOW LGBTQIA+ Representation Assures Better Data.” NEFE, 2020, www.nefe.org/news/2022/07/how-lgbtqia-representation-assures-better-data.aspx.

In India, Financial Literacy Programs Are Lifting Families Out of Debt and Fueling New Prosperity, 2022, www.adb.org/results/india-financial-literacy-programs-lifting-families-out-debt-fueling-new-prosperity.

Jones, Jeffrey. “LGBTQ+ Identification in U.S. Rises to 9.3%.” GALLUP, 2025, news.gallup.com/poll/656708/lgbtq-identification-rises.aspx.

Knight, Kyle. “India’s Transgender Rights Law Isn’t Worth Celebrating.” Human Rights Watch, 28 Oct. 2020, www.hrw.org/news/2019/12/05/indias-transgender-rights-law-isnt-worth-celebrating.

Milana, Carlo, and Arvind Ashta. Microfinance and Financial Inclusion: Challenges and Opportunities, Strategic Change, 2020, www.researchgate.net/publication/313553041_Microfinance_and_Financial_Inclusion.

“A Pioneer in Microfinance.” Grameen Bank, 1 July 2024, www.grameen-info.org/grameen-bank-a-pioneer-in-microfinance/.

Pradhan Mantri Jan-Dhan Yojana , Department of Financial Services, Ministry of Finance, pmjdy.gov.in/. Accessed 9 May 2025.

Sharma, Upasana, and Banajit Changkakati. “Dimensions of Global Financial Inclusion and Their Impact on the Achievement of the United Nations Development Goals.” Borsa Istanbul Review, 3 Sept. 2022, www.sciencedirect.com/science/article/pii/S2214845022000631.

Spade, Dean. Normal Life: Administrative Violence, Critical Trans Politics, and the Limits of Law , Duke University Press, 2015, www.jstor.org/stable/j.ctv123x7qx.

“The Third Gender and Hijras: Religion and Public Life.” Harvard University, 2018, rpl.hds.harvard.edu/religion-context/case-studies/gender/third-gender-and-hijras.

“Transgender Persons (Protection of Rights) Act, 2019.” South Asian Translaw Database, 14 Oct. 2021, translaw.clpr.org.in/legislation/transgender-persons-protection-of-rights-act-2019/.