Do Microfinance Programs Benefit Women in Developing Countries?

By Siraj, Mazhar | Advancing Women in Leadership, January 1, 2012 | Go to article overview

Do Microfinance Programs Benefit Women in Developing Countries?


Siraj, Mazhar, Advancing Women in Leadership


Abstract

This paper looks at the case for and against the view that microfinance programs benefit women in developing countries, based on a selective body of research. The analysis suggests that women constitute the largest pie of the clientele of microfinance programs at the global level. Broadly, these programs have worked within two paradigms which aim at (1) poverty alleviation and (2) empowerment of women within the feminist discourse. However, the literature remains inconclusive about the real impact of these programs. In some developing countries, access to microcredit has helped many women to cross the poverty line but even where poverty has been alleviated, scepticism persists about long-term and sustainable benefits in terms of empowerment, including but not limited to, control of women over incomes raised through investing credit or savings, improved bargaining power and better social status. This is because the commercialization of microcredit and savings services is shifting the focus from the poor clients, particularly women, to all those who needs credit from formal institutions. This development is jeopardizing the objectives of poverty alleviation and empowerment of women and calls for a greater attention to the needs of women in setting the objectives and design of microfinance programs in developing countries.

Key Words: Women, microfinance, empowerment, poverty alleviation, developing countries

Introduction

Over the past decade and a half, the concept of microfinance has received a phenomenal popularity worldwide, particularly in developing countries. Compared with a few initiatives till the early 1990s, there are now more than 7000 microfinance institutions (MFIs) in 143 countries; a high majority of their clients comprises women (Microcredit Summit Campaign [MSC], 2009, p. 22). A growing body of scholarship suggests that women benefit from financial services of the MFIs considerably, though in varying degrees, in the form of increased incomes and poverty alleviation (Yunus and Weber, 2008; Pitt and Khandker, 1998; Remenyi and Quinones, 2000), improved consumption and better schooling for girls (Khandker, 1998) and empowerment within the feminist discourse (Mayoux, 2002). At the same time, however, there exists a significant current of apprehension due to some known deleterious effects of microfinance programs on women such as indebtedness as a result of failure to repay the loans (Hulme, 2007) and increased vulnerability to domestic violence and intimidation (Goetz and Gupta, 1996; Rahman, 1999). The interest in the benefits and costs of microfinance programs is gradually increasing with the rapid expansion of the MFIs.

In this backdrop, this paper engages the wide range of arguments and attempts to examine the extent to which microfinance programs benefit women in developing countries. The discussion is organized as follows: The second section briefly explains the growth of microfinance and attempts to explore why the MFIs specifically target women rather than men. The purpose is to identify the motivation that underlies the focus on women as the clients of microfinance services. The third section looks at the case for and against the view that microfinance programs benefit women in developing countries. Then, different types of benefits are discussed in two broad categories, namely 'poverty alleviation' and 'empowerment'. The rationale for choosing these categories is explained at the beginning of the section. The last section draws some conclusions.

Before proceeding further, it seems pertinent to mention two caveats. First, the terms 'microcredit' and 'microfinance' are not the same. Microfinance is a broader category which refers to a range of financial services including microcredit, micro-savings and/or micro-insurance (Rahman, 2004), but nevertheless the bulk of the services still comprises microcredit (Ditcher, 2007). The usage of these terms in this paper is guided by this distinction. …

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