Credit where credit's due: The enabling effects of empowerment in Indian microfinance.

• We examine the impact of women's empowerment on their creditworthiness. • Women's empowerment is measured using a multidimensional index. • The sex of the first child being male is used as an instrument for empowerment. • In North India, women's empowerment has a positive effect on the loan amount • In the rest of India, education, not empowerment, increases the loan amount. We utilise primary data collected from a North Indian village to examine the impact of women's empowerment on their creditworthiness, as measured by their total annual loan amounts. Our key explanatory variable – an empowerment index – has been constructed using four factors – economic, social, interpersonal and political. We find that more empowered women received greater cumulative loans. We have instrumented empowerment by the sex of the borrower's first child being male. It seems that in the male-dominated environment of North India, the 'luck' of giving birth to first child as a son helps a woman seize opportunities for empowerment. These village-level findings regarding empowerment are consistent with the results we obtain for the whole of North India using a separate and national dataset. We also show that for the rest of India, it is education and not empowerment, that is a more important determinant of loan volumes. [ABSTRACT FROM AUTHOR]