Microfinance and its Impacts on Development and Women

By Deanna Salerno

Is the emphasis placed on credit repayment so intense that other aspects of development are left behind?

The empowerment of women has been increasingly correlated with Microfinance. Some research suggests that women’s participation in microcredit programs helps to increase women’s empowerment, while others argue that economic productivity doesn’t automatically empower women.

Microfinance began formally in the 1970’s when Muhammad Yunus, an economics professor in southeastern Bangladesh, wanted to apply his theories to improving the lives of the poor. Following the success of initial experiments, Yunus founded Grameen Bank. Today, Grameen bank declares millions of members and carries a goal that Yunus strived for since the beginning; more than half of the borrowers are women.

Opinions on the impact of microfinance have been split between those who see it as a “magic bullet” for women’s empowerment and those who are unconvinced of its ability as a cure-all panacea for development.

Access to financial services can make important contributions to the economic productivity and social well-being of poor women and their households, however is it just an entry point?

Many studies show that while for some women microfinance may be empowering, for many others, it is marginalizing in both economic and sociopolitical terms, and in some cases, it increases domestic violence. Studies also show that technical advice on agriculture, education, and health is not given as equal importance as that of credit.

Despite the effective role of microfinance in organizations for providing financial services to poor women, it cannot substitute for broader policies. Similarly, the lack of sustainability of microenterprises and the dependency on NGOs for credit further counter the ‘development’ impact of microfinance.

To better stabilize and further the development impact of microfinance, NGOs should provide microcredit along with other beneficial services that are equally emphasized with that of credit.

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2 responses to “Microfinance and its Impacts on Development and Women

  1. alisonborman

    I am really interested in microfinance and have been following its criticism so I was interested to read your article. I have heard of the issues with domestic violence, but had never considered the negligence of more technical advice rather than just credit. I wonder if some of this is outside of the scope of microfinance institutions’ influence, but I would really hope to see these issues addressed, particularly those in the cases where women are left worse off than better.

    Like

  2. Dear Deanna,

    While Microfinance can be a positive tool to help people and women gain access to financial services, it most certainly is not the only tool. I also agree that a combination of broader tools and policies must also be used to help people move out of poverty and improve their living conditions.

    ~Professor Myra Chaudhary

    Like

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