WOMEN AND MICROFINANCE
P.V. Viswanath
Learning Goals
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Why are most microfinance borrowers women?
Is targeting women efficient?
Does targeting women help self-sustainability goals?
Does microfinance help women achieve equality in the
home?
How can microfinance help promote social capital and
women’s empowerment?
Is the focus on women too restrictive for the future of
microfinance?
History
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When Grameen Bank started, most borrowers were men;
just 44% of clients were women in Oct. 1983
In 1986, the number was about 75%; in 2008, it was 95%.
100% of Grameen USA’s clients are women.
Women’s roles have become more important in the wake of
other accompanying socioeconomic transformations
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fertility rates in countries like Indonesia, Bolivia and Bangladesh
have plummeted
Female illiteracy rates have also dropped sharply
These countries are heavily involved in microfinance.
This implies that microfinance can extend and develop these
transformations.
However, the data on the development and efficiency fronts
are not necessarily consistent.
Commercialization and Gender
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Evidence shows that as the microfinance industry
commercializes, the number of female clients drops.
Women tend to be among the poorest of an MFI’s clients.
In Frank’s (2008) study, NGOs that converted to RFIs
(regulated financial institutions) tended to have a smaller
proportion of women borrowers.
In their study, loan size also tended to increase after
conversion. There is evidence elsewhere also that loan sizes
to women borrowers are smaller.
Bauchet and Morduch (2010) find a negative correlation
between operational self-sufficiency (i.e. profitability) and
the percentage of women borrowers served.
Gender and repayment rates
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On the other hand, there is strong evidence (Armendariz
and Roome, 2008) that women are better about repaying
loans.
In the 1995 Khandker at al. study, 15.3% of male
borrowers struggled to repay loans, while only 1.3% of
women were having difficulties.
Another study (Kevane and Wydick, 2001) found that
female borrowing groups misused funds less often.
How do we explain these results? Is there something special
about women that leads to greater efficiency in the use of
capital and/or lower monitoring costs? Does this mean that
loans are better given to women than to men?
Gender and Repayment Rates
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Women seem to take less risks. If so, the higher repayment rates of
women may simply reflect project risk.
Women may have difficulty finding capital. Hence they may be
willing to borrow in environment such as joint liability groups where
monitoring costs are low, which may lead to higher repayment rates.
That is, women may be willing to pay an additional tax in the form
of unproductive time attending group meetings etc because their
opportunity costs of time are lower and their alternative sources of
capital are fewer.
For cultural reasons, women may also find it difficult to find jobs;
hence they may work around the house rather than in other and
varied locations; this may make it easier to monitor them.
The choice of investment projects, such as tending to goats, sewing,
baking goods or keeping a small shop may be easier to monitor.
If so, higher repayment rates may not be due to gender.
Gender Differences in Rates of Return
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Although repayment rates are lower, there is some evidence that average
returns to investments by men are higher. This may explain Bauchet and
Morduch’s findings of negative correlation between profitability and focus
on women.
De Mel, McKenzie and Woodruff (2009) find that mean returns to capital
are higher for men than for women in Srilanka.
They find that this is due to the nature of investments made by women,
which tend to be less productive. Again, the reason for such investments
may be cultural.
There is also evidence that even when men and women both invest in the
same activity, e.g. farming, men have higher returns.
However, the return for this is that men’s farms have greater inputs. It seems
that the woman’s land is starved of required inputs relative to the man’s.
This is, obviously, economically inefficient.
On the other hand, a Guatemalan study finds no difference between men
and women in economic responses to credit access. They are both efficient
in generating employment. There may be cultural differences that explain
this geographical variation.
Microfinance and female empowerment
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What we see, then, is that there may be inefficient allocation of capital and
other resources to women. They may also have reduced (and inefficient) access
to jobs.
Microfinance might even the playing field in giving them more access to such
resources. If so, economic efficiency could be increased.
In addition, microfinance may help to reduce the cultural factors that induce such
inefficient resource allocation in the first place.
Browing and Chippori (1998) suggest that bargaining power in a household is
driven by the abilty of women to credibly threaten to leave the household.
Access to microfinance can improve the efficacy of their threats and thus
improved access to resources.
There is also evidence that women’s decisions tend to be biased in favor of
higher expenditure on children’s health and education (Blumberg, 1968). Child
survival probabilities are also tied to women’s control of income. Thus
microfinance could reduce the prevalence of inefficient gender attitudes and
social norms.
The evidence on whether microfinance actually translates into greater women’s
empowerment is more mixed.
Microfinance and female empowerment
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Rankin (2002) argues that microfinance may entrench gender roles.
Some studies show that men, and not women control the
microenterprise investments and income.
Even when women maintain control, they may be encouraged to take
up investments like sweater knitting that maintain traditional gender
roles.
Increased income could lead to a decreased role for women. For
example, lower caste Muslim women in India tend to work with their
husbands in the fields; however, once they become richer, they tend
to go into seclusion in the house.
Hence gender-separating practices have high income elasticity.
Thus, many microfinance programs such as BRAC and Pro Mujer also
include education about legal and social rights and basic health
practices as part of their implementation.
Gender focus in Microfinance
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Many microfinance programs focus entirely on
women because of various assumptions:
 Women
are important in poverty alleviation and hence
for economic development
 Women form a large proportion of the poor
 Women spend more of their income on their families
and hence a focus on women improves the welfare of
the whole family
 A focus on women empowers women
Gender focus in microfinance
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Some arguments against a focus on women are:
 women-focused
microfinance does not automatically
lead to empowerment; the underlying problem has to
do with cultural norms.
 Loans to women are less profitable. Also, some social
education that is bundled with microfinance adds to the
cost and reduces sustainability possibilities.
 Focusing on women can raise tensions in the home.
 Microcredit to women places yet another obligation on
an already borrower, already overburdened with
familial responsibilities.