Testing the impacts of microfinance on women

Many believe providing women with microfinance leads to economic, social and political empowerment that transforms gender relations. Others claim microfinance does not change decision-making patterns within households, so may actually reinforce existing gender imbalances.

Microfinance, or microcredit, has been praised against the backdrop of success stories such as the Grameen Bank in Bangladesh, BancoSol in Bolivia, and Bank Raykat Indonesia’s Unit Desa. The Microcredit Summit of 1997 attracted worldwide attention and increased the amount of donor and commercial bank money available. It was hoped that by 2005 at least 100 million poor households would have access to loans, and it was reported that about 76 percent of clients are women.

Results have been mixed. Decision-making patterns within households have not always changed in favour of women. Research from the University of Antwerp in Belgium uses data from South India to analyse the impact of different loan arrangements on decision-making within households, and therefore on gender relations.

Microfinance packages in India generally come from state banks or women’s groups established by non-governmental organisations. Women with state bank loans often use them for consumption and emergency purposes such as health care expenditures, dowry payments or repayment of earlier debts. Those with women’s groups tend to use the group fund as a last resort.

The research finds that:

• Generally, direct credit delivery from banks to women does not influence decision-making patterns in the household. Women may have more say in matters directly related to the loan use, but this does not lead to increased involvement in other areas.
• Conversely, channelling funds through women’s groups, along with technical and social awareness training, leads to an overall shift from male decision-making that follows social norms to female decision-making and more bargaining.
• The longer women remained in groups the greater the chance of their moving away from following group norms.
• More frequent meetings, more intensive training and more investment in building groups created more additional effects than longer group membership by itself.
• Women in groups engaged in household bargaining with public decision-making bodies such as local councils, dairy co-operatives, forest and watershed committees, village health committees and teacher-parent associations, and considered such participation important.
• The group fund and their individual savings accounts made it possible for women to protect part of their income from men. They gained longer-term access to financial resources and improved their status within the household.

Therefore integrated credit packages with the intermediation of women’s groups have an advantage over direct credit from banks.

Those engaged in microfinance planning should:

• not assume that all microfinance programmes empower women
• recognise that social group intermediation has more empowering effects than direct bank-borrower individual lending
• recognise the difference between microfinance programmes that use women’s groups as financial intermediaries only and those that consider groups to be agents of social change
• seek to provide credit within a package of voluntary savings facilities, non-productive loans, insurance, enterprise development, management training, marketing support, literacy and health programmes and gender and social awareness training.

Greater female participation in household decision-making is key to overall economic and human development. More must be done to promote the integrated package of services associated with the ‘credit-plus’ approach to microfinance.

Source(s):
‘The impact of microfinance on decision-making agency: evidence from South India’ Development and Change 35(5): 937–962 , by Nathalie Holvoet, 2005

id21 Research Highlight: 5 December 2005

Further Information:
Nathalie Holvoet
Institute of Development Policy and Management
University of Antwerp
Venusstraat 35
2000 Antwerp
Belgium

Tel: +32 (0)3/ 2204413
Fax: +32 (0)3/ 2204481
Contact the contributor: nathalie.holvoet@ua.ac.be

Institute of Development Policy and Management, University of Antwerp, Belgium

Other related links:
'Realising the potential of microfinance'

'Building relationships on trust – understanding how microfinance schemes survive'

'Poverty and gender: the limits of microfinance'

Imp-Act: Improving the impact of micro-finance on poverty

'Self-help groups in India: Taking microfinance beyond just money'

'Microfinance: a weapon of mass empowerment for the unbankable?'