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Microfinance- the solution to end poverty and
gender inequality?
Maria Ploug Petersen
CAS, September 2009
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Programme
• What is microfinance?
• The promises of microfinance (MF)
• Why is MF so popular?
• The intervention logic and underlying assumptions
• Testing the assumptions – case study of Village Savings and Loans Associations in Kasese, Uganda
• The implications for development policy
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Microfinance – what is it?
Microfinance:
Multiple services, models (incl. savings, loans, insurance, etc.)
Microcredit:
Small loans
Target group: Poor “unbankables”. Women.
Examples: Grameen Bank in Bangladesh
VSLA
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MicrofinanceThe new development fix?
UN:
"Microfinance is much more than simply an income generation tool. By directly empowering poor people, particularly women, microfinance has become one of the key driving mechanisms towards meeting the Millennium Development Goals.” (Mark Malloch Brown, Chef de Cabinet, Office of the Secretary General, UN)
Year of Microcredit
World Bank
Private sector
NGOs
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What does MF do?
Microcredit Summit Campaign”by trying to provide women and men one crucial ingredient in
the fight to end poverty, microcredit—you are empowering the men and women of the world, to generate their own jobs, to move out of poverty with dignity” (Microcredit Summit Report 2009: 5).
World Bank - CGAP“access to financial services can empower women to become
more confident, more assertive, more likely to participate in family and community decisions, and better able to confront systemic gender inequities”
(CGAP 2003: 7).
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Synergy/multiplier effects
Economic empowerment
(choice and decision-making
power)
Political empowerment
(influence)
Social empowerment (status, norms)
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Africa - the new frontier
• ”Africa has lagged behind the rest of the worldin microfinance growth, but that is changing”(Thurman 2008: 4)
• “Microfinance and social entrepreneurship candramatically change the lives of poor people in Africa” (Lobel 2005:1)
• 24 African countries with national microfinance strategies
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Case: Uganda
• Extensive donor support for MF
• Strong government support
• Country wide
• Explosive growth in the private MF sector
• Savings and loan groups are forming everywhere
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Why has MF become so popular?
+ words in development
Help to self-help
Demand driven
Fighting poverty with dignity
Independency
Empowerment
Entrepreneurship
Market forces
Bottom-up
Actors
Women
- words in development
Recipients (undignified, disempowering)
Donor driven
Dependency on aid
Big plans
Government
Top-down
Structures
Men
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Great promises
Intervention logic
• Microfinancetargeting women
Input
• Women will invest/spend money wisely and independently
Actions• Poverty
reduction/entre-preneurs/growth
• Economic empowerment
• Gender equality
Results
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Underlying assumptions
1. All women are potential entrepreneurs who will act rationally - “homo oeconomicus”
2. Women are more responsible than men (link btw. reproductive/productive roles)
3. Women are in control, capable of acting independently (despite disadvantaged position, disempowered, suppressed)
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Women as change agents
“Access to finance enables poor women to become economic agents of change” (CGAP)
Assumption:
Women have the capabilities and the motivation to act as expected, become empowerment, reduce poverty and create economic growth.
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Questions
• Are all women entrepreneurs?
• What is rational behaviour?
• Can and will women act independently?
• Does microfinance automatically lead to poverty reduction, women’s empowerment and gender equality?
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Case study
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Testing assumption 1
All women are potential entrepreneurs who will act rationally - “homo oeconomicus”
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Women as entrepreneurs
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Women as entrepreneurs
Coffee farmer Fish seller
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Limitations to entrepreneurship and economic growth
• Many women does not take loans
• Profit is rarely reinvested in businesses
• Businesses do not tend to expand
• Loans feed into a general income flow and are often spent on ”unproductive purposes”
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Entrepreneurs?
Behaviour restricted by barriers
Loan too small. Loan period too short.
Limited options/ideas/skills
No market access
Norms/habit (gender stereotypes)
Reproductive work and responsibilities
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Homo oeconomicus?
Rationality as context specific
• Survival (hand to mouth)
• Minimizing risk and/or exclusion (limiting investments, avoiding debt)
• Risk spreading (- specialization)
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Poverty reduction
• Profit/loans spend on food, medicine, clothes, school fees.
• Assets (livestock, household investments)
• Income smoothing
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Assumption 2 + 3
• Women are more responsible than men
• In control and capable of acting independently
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Women in control?
Scenario 1: Cooperation (less conflict)
Scenario 2: Conflict/violence
Scenario 3: Women have no control. Proxy borrowing.
Is ‘control’ a good indicator for women’s empowerment and gender equality?
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Decision-making power
• More influence on day-to-day decisions (consumption) and household investments
• Not necessarily a shift in traditional fe(male)decision-domains (marriage, land purchase, crops)
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Women more responsible?
Responsibilities and gender
Men: “Resource persons”, “breadwinners”
Women: “family managers”
Unintended consequence of MF:
Men are sidelined. Women are overburdened.
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Gender equality?
More control and decision-making
power
More responsibility/
Increased work burden
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Poverty Reduction or Gender Equality
Women’s use of profit:• Food/consumption• Medicine • Clothes• School fees
Analysis:Poverty reduction perspective Feminist – gender equality perspective
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Summing up
• Microfinance (VSLA) targeting women
Input
• Entrepreneurs (rational behaviour)
• Responsible mothers
• Independent women
Actions?• Entre-preneurship/
growth
• Poverty reduction
• Economic empowerment
• Gender equality
Results?
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Women as change agents• Capital is not necessarily the binding constraint
• Structural barriers (economic, non-economic)
• Motivation
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Implications for development policy
“Microcredit allows families to work to end their own poverty – with dignity”
(Microcredit Summit Report 2009)
• Development as the responsibility of the poor (a local problem, which individuals can solve)
• What role for the states and international organisations?
• Blame for failure placed on the loan-takers and not the policy-makers
• The assumption that the poor will gladly take on this new responsibility