MICROFINANCE for women's empowerment

Micro-finance and women's empowerment: the magic bullet?

Micro-finance programmes targeting women became a major plank of donor poverty alleviation and gender strategies in the 1990s. Literature prepared for the international and regional Micro-credit Summits from 1997, many donor statements on credit and NGO funding proposals present an extremely attractive vision of increasing numbers of expanding, financially self-sustainable micro-finance programmes reaching large numbers of poor women borrowers. Through their contribution to women’s ability to earn an income these programmes are assumed to initiate a series of ‘virtuous spirals’ of economic empowerment, increased well-being for women and their families and wider social and political empowerment. Funding for programmes which place prime emphasis on women's empowerment has decreased.

Donor funding has generally been conditional on compliance with Guidelines for Best Practice aiming at financial sustainability. However assumptions that any 'trickle up' from financially sustainable microfinance in itself will be sufficient to bridge the gap left in 'trickle-down' from macro economic policies are misplaced. Female targeting without adequate support networks and empowerment strategies may merely shift all the burden of household debt and household subsistence onto women. This has adverse implications not only for women themselves, but also for children and the men's role in the household and society. There are serious dangers that microfinance governed solely by financial sustainability concerns will further disadvantage the very poor who are excluded from such programmes without any alternative safety nets.

Why should we worry? Gender impacts

However an increasing body of evidence suggests that the contribution of women's empowerment is generally less than assumed:

• Credit is also debt. Savings, loan interest and insurance premiums are potentially also foregone investment in businesses, childrens' education and health or necessary consumption.
• In many cases women continue to work in saturated markets earning very low incomes.
• Women's access to these very small incomes may lead to men withdrawing their contribution to household expenses.
• Group formation for debt repayment may increase tensions between women within the community and does not necessarily lead to changes in women's status.

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Empowerment versus Sustainability?

Women's empowerment is an important contribution to financial sustainability through increasing demand for services and repayment capacity.

However evidence indicates that negative impacts of programmes will be further reinforced by unthinking replication of many principles of financial sustainability 'Best Practice' currently being imposed by donors, in particular:

• high interest rates and service charges to cover costs of delivery
• rapid programme growth to benefit from economies of scale
• reducing staff and staff costs through narrow focus on micro-finance
• reducing complementary services
• use of 'voluntary' contributions of clients and groups to identify eligible borrowers, ensure repayment and decrease costs of service delivery
• failure to incorporate empowerment indicators in Management Information Systems.

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Rethinking 'Best Practice' : Areas for Innovation

At the same time there are no easy blueprint solutions. Different micro-finance providers have very differing structures and constraints. Importantly empowerment strategies need to be as cost-effective as possible in order to maximise their contribution to programme sustainability. Depending on their particular circumstances women need equitable access to all types of financial services: from banks right through to NGOs working on empowerment issues within which savings and credit groups form an organizational base.

There is an urgent need for innovation adapted to different institutional structures to ensure that financial services, including micro-finance, will be both accessible to women and fulfil their potentially very significant contribution to women’s empowerment. There is a need for:

• Greater clarity in the underlying gender and empowerment vision of microfinance programmes.
• Building on the organizational base provided by micro-finance (individual lending and group-based) for wider organization to challenge gender inequality.
• Innovation in product design to respond to women’s needs and change rather than reinforce gender inequalities.
• Innovation in cost-effective provision of non-financial services.
• Commitment to organizational gender mainstreaming to ensure organizational capacity to realize the full potential of micro-finance to empower women.
• Mainstreaming gender and women's empowerment in policy advocacy and linkages with wider movements challenging gender inequality.

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