Public Policy Advisory
Spouse's Signature in Loan Contracts: Signing Off on Women's Socio-Economic Empowerment
Athena Infonomics

Microfinance programs are noted for their contribution and their potential in women's socio-economic empowerment by providing financial services to the poor who cannot access traditional methods of banking. With the presence and success of Self Help Groups (SHG) growing in India, the SHG-Bank Linkage model of microfinance delivery is particularly of significance. Typically, gender focused Self Help Promoting Institutions (SHPI) or Microfinance institutions (MFI) lend to SHGs of 15-30 members each with 70-85% of its clientele being women, sometimes conditional on spouses being in different groups. Besides structural, sociocultural challenges, there are legal and administrative factors that hinder women's access to credit facilities.

One such prevalent clause in loan contracts requires women's spouses (or male guardian) to sign the loan contract for it to be valid and complete. This can be problematic as signature from the spouse as co-signer has an implicit permission stemming from the underlying power dynamic relating to financial decisions. While financial transparency is important in a household in a social sense for good relations and in an economic sense for revenue optimization; requiring explicit consent in the form of a signature robs women of the financial independence that microfinance offered to empower them with. In this sense, the clause on spouse's signature potentially precludes access to women who need financial options that the spouse could not or chooses not to provide, thereby anchoring financial dependency with the unbreakable chains of patriarchy.

Paradoxically, the organizations that defend this clause using the justification that it protects women from bearing the sole burden of repayment/default of loans that are taken in their name but are mostly passed on to their husbands. Some microfinance institutions employ reciprocity in spousal signature by requiring husbands' signatures for their wives' loans and wives' signatures for their husbands' loans. A better alternative is to replace the requirement of spouse co-signature with other members of the family or community or to eliminate this requirement to improve women's access to loans.