Microfinance, Poverty and Gender

Microfinance, poverty and gender are very interrelated and passionately debated terms in the field of development.  In the 1970s it was recognized that the lack of access to the financial services was preventing the working poor from improving their lives.  From this emerged the notion of establishing a financial system that can reach the poor client in a more sustainable basis than the previous unsuccessful schemes of directed debit.

In 1976, Muhammad Yunus, established Grameen Bank in Bangladesh.  He developed some highly effective techniques to lend the poor.  Although in the late 1970s and 1980s some MFIs like BancoSol in Bolivia and the Bank Rakayat Indonesia performed credibility, they were able to attract only limited international focus.  In the 1990s, however, MF has captured the attention of governments and donor agencies internationally.  At this stage MF is also seen as one of the key strategies for poverty reduction in its own right.  The Microcredit Summit held in 1997 saw a great potential for reducing poverty by the Microcredit Programs.  It also stated that the most of the world’s billion poorest people could be helped through Microcredit programs.

The limitation for women to access credit was first highlighted in women’s conference in Mexico in 1975.  Then in the 1990s couple of MFI started focusing on women lenders as they found women repayment rates were significantly higher than men’s.  Another rationale for this focus on women is they are the poorest and are responsible for household welfare.  These increased access to financial services have led the rural poor women to their economic and social empowerment along with household wellbeing.  Studies have shown that some Microcredit programs in some context can enhance economic improvement in the situations of women as well as hasten their empowerment.  Comparative studies between NGO credit members and non-members in the NGOs in rural Bangladesh have reported credit members to be more confident, assertive, intelligent, self-reliant and conscious of their rights.  Evidence from studies also claims that women are more likely to invest additional earnings in the health and nutritional status of the house and in children’s schooling.  This means that women borrowers have greater positive impact on household poverty reduction.

“Microcredit is a critical anti-poverty tool…..a wise investment in human capital.  When the poorest, especially women, receive credit, they become economic actors with power.  Power to improve not only their own lives but, in a widening circle of impact, the lives of their families, their communities and their nations.”

                                  Kofi   Anan

However, on the other side of the fence, critics argue that poorly designed Microcredit scheme can harm the women they set out to help.  Often in various social context women are considered as only the channel through which loans could be accessed, while the husband decides on the expenditure.  As a result women struggle to repay their loan.  They may borrow from elsewhere and get in serious debt, increasing domestic violence.

                                     

Although Microfinance is not the “magic ingredient” to women empowerment and poverty reduction, it has proven to be one of the strategies to empower women in relation to social and economic situations in many countries.  With a little more focus on gender differences at every stage from program planning to service delivery, microfinance can prove to be helpful for women.

Microfinance can be seen as being part of an integrated program for poverty reduction for poor households.  There are ample evidence of Microcredit programs contributing to poverty reduction.  The borrowers are often reported to have an increase in income.  Studies on Grameen Bank and BRAC found that the members of those programs had increased well- being, achieving basic education not to mention better per capita income than the non-members.  Income, assets and livelihood security was noticeable among the long term members who invested their loans in more profitable way.

Yet there are debates about the level of impact on poverty reduction and about whether Microfinance can reach the poorest of the poor, Microfinance institutes reported reaching 205,314,502 clients.  137,547,441 of those are among the poorest when they took their first loan. The figures clearly indicate that Microfinance institutes are able to design products suitable for their poor client enabling them to overcome poverty.

There is no one solution to a complex issue like poverty reduction and gender empowerment, but in my opinion, Microfinance is one bold step in trying and giving voice to a large population of women who had been grossly overlooked and neglected for too long. There might be shortcomings, there might be hiccups along the way but at least things have started to change for a large portion of the world population due to this concept of Microfinance. What it needs now is some fine tuning to suit the very destitute and take it from there. The plans might need some trial and error until we get to the ultimate goal, but it is definitely worth continuing.

Source

www.ifad.org/gender/pub/gender-finance

www.gdrc.org/icm/wind/beneath-surface.html

Maes, J. P and Reed, L. R : 2012, 'State Of the Microcredit Summit Report 2012'

Morduch, J and Haley, B :2001, 'Analysis of the Effect of Microfinance on Poverty Reduction'

Mayoux, L and Hartl, M :2009, 'Gender and Rural Finance : Reaching and Empowering Women'

Cate Rogers and Sue-Ellen O'Farrell : 'Microfinance, Gender and Aid Effectiveness' avilable at

www.ode.ausaid.gov.au