Poverty reduction has been identified as the overarching long term goal for most of the development interventions in Africa, and more recently crystallised in the Millennium Development Goals and the New Partnership for Africa’s Development (NEPAD). In Africa, more than 40% of its 750
million people live below the internationally recognized poverty line of $1 a day, and the evidence is even more worrying for sub-saharan Africa. The number of poor people has grown relentlessly, causing Africa’s share of the world’s absolute poor to increase from 25% to 30% in the 1990s (UNDP, 2001 and 2002). However, Africa’s development challenges go deeper than low income, falling trade shares, low savings, and slow growth. They also include high inequality, uneven access to resources, social exclusion, and insecurity, especially amongst women. While some African countries are showing promising economic progress and are making notable strides in addressing major development constraints, such as Uganda, the majority of the continent is still under great stress to meet the human survival needs. More specific concern is raised due to rural-urban disparities in income distribution, access to education and health services, and prevalence of ethnic or cross-boundary conflict. In particular, the most outstanding factor is the gender disparity in access to resources, such as land, credit, technology, markets and production information and skills development.
In most African countries women tend to account for an average 51% of the population, and make up about 65% of the rural labour force. In addition, women tend to shoulder the greater burden of child and family welfare, social and community obligations, engaging in more than one economic activity as well as undertaking domestic chores. In connection with the growing emphasis on poverty reduction sustainably, micro-credit has been recognized as the most necessary and ‘the missing ingredient’ which is most effective in reducing poverty of the poorest of the poor (Otero and Rhyne, 1994; Khandker, 1998). Thus, many rural based micro-finance programmes have attempted to address the women specific need for micro-credit. Female entrepreneurs and microcredit borrowers tend to face greater constraints than men such as socio-cultural barriers, legal and structural constraints, higher rates of illiteracy, inadequate experience in credit management, and constraints related to collateral, marketing, inputs, production technology, to name just a few.
This paper analyses the effectiveness of micro-credit as a means to reducing poverty, with particular focus on women, and demonstrates, through the critical analysis of some country-specific examples, that the use and supply of micro-credit does not always lead to a sustainable impact on household or female poverty reduction. This will be done through the analysis of the micro credit delivery mechanisms and related conditions of the micro-finance institutions (MFIs) projects and programmes.
This paper uses the term micro-credit and micro-finance interchangeably. The methodology used in this paper is field observations, in addition to interviews and discussions with micro-credit delivery officers as well as clients in Ethiopia and Malawi. The field investigations were carried out at different points in time during the period 2001 and 2002.
ECONOMIC RESEARCH PAPERS NO 74 (January 2003)
Factors Impeding the Poverty Reduction Capacity of Micro-credit: Some Field Observations from Malawi and Ethiopia by Sunita Pitamber
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The African Development Bank is the
premier financial development institution
of Africa, dedicated to combating poverty
and improving the lives of people of the
continent and engaged in the task of
mobilizing resources towards the economic
and social progress of its Regional Member
Countries.The Bank’s s mission is to
promote economic and social development
through loans, equity investments, and
technical assistance.
The ADB is a multilateral development bank
whose shareholders include 53 African
countries and 24 non-African countries
from the Americas, Asia, and Europe. It
was established in 1964, with its
headquarters in Abidjan, Côte d’Ivoire,
and officially began operations in 1967.
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