Pooja Sajanani is a regular contributor to Breaking the Glass Ceiling.
Since its inception in 1976, microfinance has had a feminist association. In 2016, out of the 132 million clientele of microfinance which cumulatively borrowed $102 billion, 84% were women. Many studies have shown that the availability of microcredit has increased women’s mobility, political participation and decision making. This article will explore this relationship more deeply in a developing world context, identify the factors constraining the positive effect of microfinance on women empowerment and suggest some ways to overcome those constraints.
A broad definition of microfinance is accessible, affordable, collateral-free credit and other financial services to the underprivileged people who would find it impossible to avail these services from a mainstream bank. There are usually two ways in which microfinance is available: group lending which requires borrowers to form a group and take responsibility for each other’s loans; and individual lending for self-employed who are destitute but skilled business people and have slightly higher chance of repayment without a collective guarantee. Few of the reasons that microfinance targets women are because women consist of the poorest of the poor, they seldom hold property in their own name, they have more entrenched community ties and they invest (and reinvest) a higher percentage of money earned into their family’s welfare (education, health and nutrition) than men.
One of the beneficiaries of microfinance is Lourdes, a young single mother from Paraguay, who obtained a $60 and started a business selling empanadas and snacks to support herself and her son. Gradually she repaid the loan and secured more loans some even worth $975 to expand her business. Lourdes moved into a larger shop with a refrigerator and secured gates which is also attached to her home. Microfinance helped Lourdes to lift her family out of destitution and vulnerability by making use of the skills she possessed. She is now economically independent and has more prestige in her society.
Not only does microfinance makes it possible for women like Lourdes to become self-reliant but many studies show that it increases the socio-cultural, economic, political and decision-making power of women in their households and communities. In Philippines women’s role in managing household funds increased dramatically. Studies in Nepal, Cote D’Ivoire and Morocco show that women participating in microfinance programme held more sway in decisions traditionally dominated by men such as family planning, daughter’s marriage, education of children, and the buying and selling of property. Moreover, in Bangladesh, South Africa and Nepal decrease in incidents of domestic violence has been observed as women protested abuse and alcoholism through self-empowerment, as well as group action. Not only have women been able to exercise more control in the domestic sphere of their lives but, because of their enhanced ability to generate social capital and take collective action, they have been able to stand up against the traditional gender stereotypes and advocate for their rights and freedoms on a political platform. This has been documented in many researches done in Bangladesh, Philippines, Nepal and India.
However, it is not all roses and many studies refute the notion that microfinance programmes really empower women. These studies claim that although women take out micro-credit they seldom have real autonomy over its use. In some communities in Bangladesh, some husbands force their wives to take out multiple loans which are impossible to repay and while they enjoy the benefits of those loans women experience more and more stress and dependency. Furthermore, since women’s lives are more embedded in the community they tend to experience retribution disproportionately compared to men. This would mean that microfinance not only is ineffective in empowering women but to some extent disempowers them and widens gender inequality. In addition to that, microfinance in general is battling charges of commercialization of the schemes by charging exorbitant interest rates and using derogatory means to collect repayments; and slipshod and corrupt institutional and regulatory infrastructure. In the infamous case of Andhra Pradesh in India, many farmer suicides have been linked to severe indebtedness caused by haphazard borrowing from microfinance institutes.
As much as we would like to we cannot and we must not deny that these criticisms are reflecting reality to some extent. What we should do is act to improve rather than discard something that can be a double-edged sword to fight poverty and gender inequality. It is noted in literature that the drawbacks of microfinance are not ‘intrinsic’ and the benefits it can accrue for women empowerment are not ‘automatic’. Rather the exact outcome of microfinance on a community’s women depend upon a complex set of factors including, but not limited to, the actual design and implementation of the microfinance programme, the ‘rigidity’ of patriarchal culture, and the laws and regulations that govern the MFIs in that country.
Considering that most of the women taking out micro-credit loans are illiterate, MFIs should work with women entrepreneurs to develop crucial skills that help them develop their business such as accountancy, marketing and how to use technology to their advantage. MFIs that do this are more likely to succeed in empowering women. For example, Kiva introduced a programme in Zimbabwe where instead of paying interest women should volunteer at local schools, thus increasing social capital of the society. Wisconsin Microfinance engineered a scheme in which women would pay only 1% interest on their microloans but help foster a cycle of capacity building by training and transferring business acumen to next round of loan recipients. There is also a clear need for a bottom up approach where women engage in designing the model to best suit their need. In addition to that MFIs, NGOs and to some extent government bodies must take actions to actively combat the patriarchal culture by raising awareness of women’s rights and encouraging women to exercise autonomy over the use of the loans issued to them. Finally, the government needs to create microfinance regulations that do not serve the vested interests of politicians or commercial banks but stimulate good governance and sustainable policies. These regulations must take into account the local social matrix to be able to advance women empowerment.
In this article, I discuss at length the positive effects of microfinance for women such as more economic independence, increased social prestige, reduced incidents of domestic abuse and higher decision-making power in domestic, communal and political sphere. I weigh these against the disempowering effects of microfinance such as more strain and vulnerability because of lower actual autonomy over the use of loans and disproportionate retribution experienced by women. Finally, I argue that the benefits and drawbacks of microfinance arise not automatically but because of several intertwined socio-economic, cultural, organisational and regulatory factors which can be adjusted correctly and creatively through collective effort of MFIs, NGOs and governments to make microfinance the instrument of widespread and sustainable empowerment of women.
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The Hidden Ways Microfinance Hurts Women. (2017). Brandeis Magazine, http://www.brandeis.edu/magazine/2012/fall-winter/inquiry/karim.html
BBC (2010). India’s micro-finance suicide epidemic
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