Academic journal article Journal of International Women's Studies

Women and Informal Credit: Lessons from Moretele, South Africa

Academic journal article Journal of International Women's Studies

Women and Informal Credit: Lessons from Moretele, South Africa

Article excerpt


Informal credit plays an important role in the development of rural and urban areas in South Africa. It is about giving the disadvantaged poor people and women access to needed financial services to increase their earning opportunities, to meet their needs and to deal with emergencies. The findings suggest that informal credit impacts positively on the lives of the majority of women in the study area, to the extent of enabling them to become self-employed through self-chosen economic activities. It has also assisted them both in accumulating resources and protecting them from further lack of incomes in times of stress.

Keywords: Informal credit, women development, poverty alleviation, self-employment.


About 80% of women live in South Africa's developing areas. Almost 64% of them are farming, providing about 70% of labour. The work of women farmers is essential for food security in South Africa. The majority of these women are unpaid family workers, working at least 14 to 17 hours a day, spending about 50% of their time on agricultural and about 25% on domestic related activities. The majority of women in South Africa's developing areas still have no access to formal credit, subsidies and inputs (McIntosh & Friedman, 1989), and this is a serious obstacle to agricultural and rural development (UNIFEM, 2005). These women produce almost half of food consumed in these areas, while at the same time are excluded from the formal credit system (Hunger Project, 1999). As a result, they have turned to informal credit system for assistance. Informal credit provides them with needed financial assistance to pursue their development goals. Various studies by Sun Xifang (2006), Isaksson (2002), and Mauri (2000) bear witness of vitality of informal credit in alleviating large-scale poverty. Informal credit is part of the economy in which financial transactions that take place are not officially regulated or monitored; however, it should not be dismissed as unimportant system (Isaksson, 2000).

This study combines the data on informal credit and saving associations to investigate their contributions to social and economic conditions of women in the study area. The main purpose of this study was to document the nature, advantages and disadvantages of the various informal credit used by the participants (women households) who combine agricultural and non-agricultural activities in rural and semi-rural areas, with the view to assess their impact in changing women's living conditions.

Statement of the problem

There is a general understanding that the informal credit system plays a vital role in the lives of the poor who have no access to formal finance in promoting their socio-economic development. A well organized informal credit system can assist the poor and marginalized people to access needed finance (Rutherford, 2001). It also facilitates the process of job creation in which some will become self- employed entrepreneurs while others involved in other related activities (Thomas, 1992). The main reason for the emergence of informal credit has been the unwillingness of the formal financial sector to service some relatively risky categories of borrowers, namely women other disadvantaged poor group of people. Such a risky situation often stem from the difficulty of obtaining reliable information on the borrowers (Bolnick, 1992). Since women have fewer alternatives for borrowing, they have been more vulnerable but good candidates for informal credit. Informal credits have been especially important for women and households headed by women, who often have difficulty in getting credit (World Bank, 2001). A collage of informal credit and deposit arrangements has increasingly attracted numerous rural and urban poor who combine economic activities with urban occupations in many developing countries (Adams, 1992). A significant literature documenting the relevance of informal credit in developing countries is given by Paulson (2000), Cox and Jiminez (1998), Ravallion and Dearden (1988), Zeller (1994), Lukhele (1990), Moodley (1995) and the World Bank (2001). …

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