Women and Microfinance

As pointed out in our introductory post on International Women’s Day, it is estimated that 70% of the poorest people worldwide are women. Women accomplish two-thirds of the world’s working hours yet they only earn 10% of the world’s income and own less than 1% of the world’s property.

An extremely entrenched set of discriminatory attitudes and practices has fostered this situation and jeopardises any attempts at reversing the trend. Women in developing countries are thus trapped in a vicious circle of multiple discrimination related to gender and poverty; as a cause as well as a consequence, they are disproportionately excluded from access to economic resources in general and access to financial services in particular – access that would allow them to durably escape poverty.

Not only are these circumstances appallingly unjust and deserve to be tackled as such, but they also represent a colossal obstacle to development altogether.  

Studies have shown that women’s access to assets have a considerable impact on the welfare of the next generation, since women tend to allocate expenditure to their children’s health care or education to a far greater extend than men do. As a result, research findings have highlighted the fact that women’s income plays a crucial role in keeping their households above the poverty level.

If access to formal financial services is extremely limited in developing countries – less than half of the population is banked, with the percentage falling below 10% in several Sub-Saharan African countries – this limitation weighs all the more down on women. Not only do they face discriminative practices, but their disadvantaged economic situations make them less able to meet collateral requirements and to provide guarantees based on assets. Furthermore, the fact that the majority of them work in the informal sector means particularly irregular and insecure income to the commercial banking sector (see research findings on Africa and specific studies on Uganda and Bangladesh).

The emergence of microfinance therefore stood out as a unique opportunity for women to find their way out of this deadlock.

And indeed, close ties have linked microfinance to women, from the inception of the first microfinance programmes up to now, when women still represent 80% of microfinance clients. A large proportion of programmes have deliberately targeted women in order to obtain the beneficial multiplier effect generated by their access to financial resources.

A number of research studies have highlighted the positive impact that women’s access to microcredit had on their households, through improving their income as well as their access to health care, education or housing.

Women’s potential economic empowerment appears as the most direct outcome of access to microfinance, since they may be enabled to start or increase economic activities, as well as enhance their participation and control over their household’s income and expenditure. Consequently, women will be in a position to invest in their family’s welfare, particularly in their children’s nutrition, health care and education, while often balancing discrimination suffered by girls in doing so.

As a result, certain microfinance initiatives even engendered the emergence of broader political empowerment for women. Organisations like SEWA (Self Employed Women’s Association) in India have led to the promotion of women’s participation in unions and local political bodies, similar to CARE-Niger, which has urged women to run in local elections.

Nevertheless, these results are not direct and systematic outcomes of access to financial services. Successful programmes such as SEWA or Grameen Bank have implemented additional initiatives specifically tailored to tackle gender issues and to empower women. Group-based financial services, for instance, have proved to be more effective, since they can constitute a powerful mobilisation tool and provide a grassroots base for collective action. More elaborate schemes include direct educational and awareness-raising training destined to promote gender empowerment.

But such advocacy-oriented programmes might be threatened by the trend towards commercialisation of microfinance institutions (MFIs). Findings from a Women’s World Banking study show that regulated MFIs were less likely to lend to women (a drop of almost 30% over a five-year period for MFIs who had morphed into regulated institutions) and seemingly to poor people as well. Not only commercialised do MFIs not focus as much on women as microfinance originally does, but as profit-seeking institutions they naturally tend to turn away from implementing design features and advocacy initiatives that address gender constraints, and certain experts such as Linda Mayoux already observe that “gender advocacy in […] crucial areas has disappeared off the agenda of the microfinance movement.”

Indeed MFIs should not lose sight of the specific and most urgent needs of women in accessing financial services. In this respect, microinsurance appears as a key area destined to gain in prominence.

Almost 80% of the world’s 1.2 billion poor people live in rural areas. Most of them are small-scale farmers and an overwhelming majority has no access to formal financial or microfinance services. Their remote situation and the fact that they are often scattered across vast regions lead them to be even more underserved than the average population of developing countries. Yet they are most vulnerable to contingencies in their economic activities. They remain continuously at the mercy of drops in market prices or potential droughts and will have to cope with ever-increasing challenges related to climate change.

Women represent a large proportion of this population and are responsible for 70% of the food production in developing countries – 80 % in Africa. Nevertheless they face disproportionate constraints in their agricultural activities due to discriminative practises relating to land tenure, inheritance rights or unequal access to land markets. Numerous additional issues make this category of women particularly vulnerable and specifically adapted microinsurance products and services necessary: for instance the fact that women are traditionally confined to grow subsistence crops – as opposed to cash crops, which are more profitable; that they usually care for the members of the family who fall ill, or that due to their perceived relative physical weakness they tend to more often be the victims of theft and crime in general (see this study).

As the consequences of the current global crisis continue to fully unfold in developing countries, it seems necessary to call to mind the enduring vulnerability experienced by women, as well as the central role they play in sustaining their household in times of hardships. Benefits related to microfinance never occur in an automatic manner, it is all the more true for women clients who have to overcome numerous impediments. Microfinance providers simply cannot overlook the necessity to mainstream the gender perspective into all stages and levels of their activities.

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