The Magic Solution: Using Microfinance As a Tool for Female Empowerment


Micro-finance is definitely one of the solutions that could be put forward that could increase the likelihood of increasing available capital to women. Micro-finance has enabled women to start and run small businesses which represent a considerable share of economic progress in both developed economies and those in transition. The role of microfinance could be expanded to include not just the provision of credit but ensuring that women actually have the services of a bank including deposit taking as 80% of women in sub-Saharan Africa are considered to be unbanked, i.e. they do not have access to the normal services of a bank.

Increasing access to capital for women could also be presented as a clear business preposition to actors in the Microfinance sector as their repayment rates far out way those of men, which means that it actually makes good business sense to lend to women. The current repayment statistics are at 98% for women and 70% for men (source: World Bank report). Grameen Bank was one of the first banks to see this and this explains why 94% of their loans go to women only. In addition to this, from the social responsibility perspective, increased lending to women has been seen to have a direct impact on the level of development in development such as more children in school, better nutrition for family and an overall improvement in the quality of life of their families.

Key considerations for microfinance institutions that wish to participate in lending to women is that they need to tailor their products to fit women’s needs rather than the other way around. For example, they should develop loan products that are accessible to women with home based businesses as well as ensure that spouses are not required to sign loan agreements for loans disbursed.

There are cultural and sociological constraints that currently exist in most societies that often hamper women from learning about, and taking advantage of micro-financing; the information may be unavailable to them. For example the high rate of illiteracy among women in Asia and Africa as well as discrimination practices in property ownership and employment.

Strategies can be employed by microfinance institutions to counter these constraints such as group or solidarity lending where loans are provided to women in a group which means that a group can be selected with some women who can read and write who can guarantee loans on behalf of those who can’t. Group lending is also a Grameen Bank initiative and contributes even further to high repayment rates as the women encourage each other to succeed in business and they can mentor each other when needed.

Ultimately, microfinance and lending to women needs to be looked as at a great business proposition and an excellent tool to helping developing economies to slowly rise out of poverty. Microfinance institutions need to look at the provision of capital and credit to women as a low risk strategy and as an excellent social responsibility strategy whose impact will be felt in the longer term

Source by Kanini M Mutooni

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