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Women and Micro-credit

Guest post by: African Development Bank

Article Overview: Since the establishment of the Grameen Bank as a micro-credit delivery model, many programmes have rushed to replicate the relative success and in doing so, a lot of attention has been given to female micro-credit borrowers. Women were specifically targeted because they make up the majority of the poorest of the poor in the rural areas and are responsible for the social and economic welfare of the family.

Women and Micro-credit

Since the establishment of the Grameen Bank as a micro-credit delivery model, many programmes
have rushed to replicate the relative success and in doing so, a lot of attention has been given to
female micro-credit borrowers. Women were specifically targeted because they make up the majority
of the poorest of the poor in the rural areas and are responsible for the social and economic
welfare of the family. During the 1990s micro-credit was seen as successful amongst female clients
because of high repayment rates and savings capacities. Furthermore, at the same time many
Non-Governmental Organisations (NGOs) and donor’s were dictated by gender policies which
specifically called for increased micro-credit outreach to women, and these micro-credit programmes
did not limit their desired impact to poverty reduction only, but extended it to achieve women’s
empowerment (Khandker, 1998; Kabeer, 1998).
Generally most micro-credit programmes, and specifically those aimed at women, aim to reduce
poverty for women and also empower them by enabling them to have their own income and
capital. However, there is very little empirical evidence that micro-credit will directly empower
women (Zaman, 1999). Empowerment, as a concept, is highly contextual and changes from one
environment to another, whereas micro-credit delivery process is applied in almost the same way
in most countries. This paper will attempt to illustrate that poverty reduction and women’s
empowerment are not the one and the same and that poverty reduction does not automatically
lead to women’s empowerment. The following paragraphs will elaborate on this process.
In order to achieve women’s empowerment, there must be a change in gender relations. Although
definitions and understanding of empowerment vary, the broader guiding milestones are generally
agreed to be: increased access to and control over resources, and specifically income, greater
participation in decision-making in the household and over her body, improved negotiation capacity
and greater mobility.
Mayoux (2000) explains that there are three underlying paradigms in the debate on micro-finance
and gender and empowerment. The financial self-sustainability paradigm emphasises the need to
provide self-sustainable financial services to the rural people, especially micro-entrepreneurs. This
is usually seen in the different manifestations of the village bank model and the Rural Organisation
of Savings and Credit Associations (ROSCAs). The assumption here is that women’s access to
these services will lead to economic empowerment thereby automatically enabling her to have
decision making powers, increased mobility, etc. because it is assumed that power is derived from
income. However, this is understandably a weak link between micro-finance and women’s
empowerment because other evidence from India and Bangladesh shows that women still tend to
give up their credit and any resulting income to the male, either voluntarily or forcibly (see Hunt
and Kasyanathan, 2001; Mayoux 1998; Mosley and Hulme, 1998).

The second paradigm explained by Mayoux (2000) is called the poverty alleviation paradigm
which is manifested in increasing outreach and access to the poor, providing small loans for
consumption and production, savings facilities, group formation and training in some of the related
aspects. In this paradigm women are targeted mainly as the poorest of the poor segment of the
population and also the one’s who are directly responsible for family well-being. The assumption
here is that by increasing women’s access to credit, and thereby increasing their income, a positive
impact on household income will occur. This will further contribute to better family well-being
and improved status and position of the female in the home, thus empowering her further to
negotiate other forms of change in gender roles and relations.
There are a number of issues within the women’s empowerment framework which affect the
assumed outcome under this paradigm. Firstly, the size of the loans does not enable the women to
make any long lasting income change for the household, at most the woman’s income will
complement other sources of income, such as from the children or the husband. In the African
context, this analysis sheds new light because in a household where both the male and female are
present, and where a negotiation of gender roles is necessary for empowerment, the micro-loan
does not result in a high female income, in most cases the husband’s income is still the major
contributor to household expenses. Secondly, the increased access to credit in the same geographical
area could contribute to market saturation of products provided by women. This is mainly because
poor women generally tend to operate in the same kinds of businesses, such as food vending,
petty trading etc. and also operate from the same local markets. This process reduces the resulting
income for each woman and increases competition in an already limited market. Thirdly, some
evidence (see Kabeer 1998) suggests that in such circumstances a woman’s successful business
may have a negative impact on the girl-child who may be required to leave school to help the
mother expand the business. Thus, the micro-finance link to gender empowerment under the
poverty alleviation paradigm cannot be assumed to occur naturally or automatically.
Mayoux’s (2000) third paradigm for the micro-finance and gender debate is called the feminist
empowerment paradigm, which underlies many of the gender policies of NGOs and donor agencies.
Micro-credit, under this paradigm, is seen as an entry point to negotiation and change in other
more broader issues of gender equality and women’s rights. This paradigm is geared more towards
addressing the social and/ or political empowerment issues because its implications touch more
upon the strategic needs of women. To a certain extent they also touch upon the economic-class
stratification of women who may benefit under this paradigm and bring about the perceived
change in gender relations and women’s empowerment.
While it is not possible either to identify or to design a micro-credit programme neatly into any
one of the above paradigms, it is worth noting at this time, that most MFIs and other donordriven
micro-credit programmes fall within the first two paradigms mentioned above. Moreover,
despite the lack of clear and convincing evidence of micro-credit’s ability or inability to sustainably
reduce poverty, more and more funds are still being put into similar micro-credit programmes.
Despite the popularity of micro credit as a poverty reduction mechanism, there is very little
evidence indicating a real positive net effect on poverty reduction (Mosley and Hulme, 1998;
Wright and Dondo, 2001). Measurements and indicators of client numbers, repayment rates,
increase in total loan amounts and portfolio, and sometimes savings rates are misleading and may
not automatically result in increased income for the household or the client.

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

Related Articles
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  III. BACKGROUND - Microfinance in Africa
  What is microfinance? FAQ
  When is microfinance NOT an appropiate tool? FAQ
  PAPER WRAP-UP: Beware of Bad Microcredit by Steve Beck and Tim Ogden

Article Tags: credit borrowers, credit delivery, credit outreach, delivery model, economic welfare, empirical evidence, empowerment, female clients, gender policies, gender relations, grameen bank, micro credit, milestones, must be a change, ngos, non governmental organisations, poverty reduction, relative success, repayment rates, rural areas



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