The Context of Gender Policy in Microfinance

Microfinance has an important gender dimension. The research of Khandker in Bangladesh showed clearly that women are better loan risks and also that women make better use of borrowed resources in terms of improving household welfare. This finding accords with anecdotal evidence from many other places, and provides a rationale for special support for those microfinance institutions that cater largely to women. Lending to women can also help change their status in rural areas. An evaluation of a women's credit program in Ecuador commented that:

Women who participated in the program went through a learning process that strengthened their leadership and organizational skills. Other qualitative changes that were observed were improvements in the women's self-worth. ... In addition, women's increased financial acuity prompted favorable changes in male partners' attitudes and level of respect. For example, members of the credit associations were able to purchase inputs, livestock, and vaccinations that helped them improve animal husbandry, and change that was appreciated by men as a positive contribution of women to the household economy.173

Sharma has summarized the justifications for targeting women in microfinance programs in the following words:

Women's status, household welfare and microfinance interact in the following ways:

• A woman's status in a household is linked to how well she can enforce command over available resources. . ..

• Newly financed microenterprises open up an important social platform for women to interact with markets and other social institutions outside the household, enabling them to gain useful knowledge and social capital. .. .

• Women's preferences regarding household business management and household consumption goals differ from men's, particularly in societies with severe gender bias. In such situations, placing additional resources in the hands of women is not a mere equalizer: it also materially affects both the quality of investments financed by the microfinance programs and how extra income is spent. . ..

• Women are thought to make better borrowers than men. .. .

• Loans are not simple handouts. If microfinance programs are designed to cover all costs. .. . development goals related to women's empowerment and improved household welfare are self-financing and no subsidies are required.

Several suggestions for operational policy measures to assist in the promotion of women's participation in rural financial programs have been made in Section 7.5 above. While these policy orientations can be effective in enhancing the role of women in microcredit programs, it is well to bear in mind Sharma's summary of evidence on empowerment and cautionary words in that regard:

173. Fundación de la Mujer Campesina (FUNDELAM), 'The Socioeconomic Impact of Credit Programs on Rural Women: A Study in Carchi, Ecuador', Report-in-Brief, PROWID, International Center for Research on Women (ICRW) and the Centre for Development and Population Activities (CEDPA), Washington, DC, USA, 1999, p. 2.

One widely cited study that made special efforts to construct measures of empowerment incorporating client perspectives is based on a 1996 survey of 1300 married Bangladeshi women members of the leading microfinance institutions, Grameen Bank and the Bangladesh Rural Advancement Committee (BRAC). The study found that married women participating in these credit programs scored higher than nonparticipating women on a number of empowerment indicators such as involvement in major family decision making, participation in public action, physical mobility, political and legal awareness, and the ability to make small and large purchases.

However, empirical studies point out that positive gender effects cannot always be taken for granted or are not as large as might be supposed. Many women, lacking skills and confidence, lean on their husbands to make use of their loans. A 1995 study in Bangladesh indicated that 'while 94 percent of Grameen Bank's borrowers are female, only 37 percent of them are able to exercise control over loan use . . .'.174

Sharma's conclusion about the overall policy context is an important one:

Ultimately, women's empowerment requires fundamental changes in society that call for more direct policy instruments. New policies should renegotiate property rights, replace rules sustaining gender inequality, and improved access to and quality of education. Fundamental change of this scale can hardly be worked out easily or quickly, especially in countries where gender bias has been a norm for centuries. Over the short run, microfinance programs provide a handy, potentially cost-effective, and politically feasible tool for moving towards gender equality. Group-based activities by women have served as important catalysts of change in Asia and Africa. The scale of change they ultimately catalyze will depend, however, on how seriously other social reforms bearing on women's empowerment are pursued.175

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