Gender and Microfinance Lecture # 8 Week 2

Reaching Women Why Women? Evaluating Impact Can one re-define gender empowerment? Structure of this class

Reaching Women 10.3 million in 1999  69 million in % increase 84.2% of total clients Quote-Rutherford (POP) SaveSafe Source: Daley-Harris, Sam (2006). “State of the Microcredit Summit Campaign Report 2006”.

Women Served Source: Daley-Harris, Sam (2006). “State of the Microcredit Summit Campaign Report 2006”.

Why Women? Women make up a large and growing segment of the informal-sector Women tend to be more credit constrained Commercial banks focus on men because men form a larger portion of the formal sector

Women’s share of the informal sector in the non- agricultural labor force, 1991/1997 WomenMen Africa Benin Chad Guinea Kenya Mali South Africa Tunisia Latin America Bolivia Brazil Chile Colombia Costa Rica El Salvador Honduras Mexico Panama Venezuela Asia India Indonesia Philippines Thailand Source: The United Nations, The World’s Women 2000: Trends and Statistics. Chart 5.13, p. 122

Why Women? Financial Impact  MFI’s standpoint Development Impact  Donors’ standpoint Empowerment Impact

Financial Impact: Targeting women customers creates financially sustainable institutions

Financial Impact Women are better customers  Higher repayment rates Conservative in investment strategy – more risk averse More vulnerable to peer pressure and threat of public humiliation Less access to credit which reduces risk of moral hazard  Hossain (1988): 81% of women had no repayment problems versus 74% of men.  Khandker et al., (1995): 15.3 % of male borrowers were “struggling” in 1991 versus 1.4% of female (missing some payments before the final due date)

Financial Impact Women are better customers  Less mobile Reduces monitoring costs – for bank as well as peer monitoring Enables women to attend repayment meetings (if applicable)  Less argumentative Lower staff costs  Institutions can hire more female staff

Development Impact: Targeting women has a greater impact on social and economic development

Development Impact Women are poorer  UNDP Human Development Report (1996): 70% of the world’s poor, about 900 million women Women spend on household consumption as opposed to personal consumption  Pitt and Khandker (1998): Empirical studies have shown that women are more likely than men to direct additional income to household consumption Working women contribute to economic growth

Development Impact Women are more concerned about children’s health and education  Pitt et al., (2003): Credit provided to women improves measures of health and nutrition for both boys and girls, while credit provided to men has no significant effect. Women’s businesses experience higher returns to capital because of lower starting point

Empowerment Impact: Targeting women reduces gender inequity and empowers women by increasing their decision-making power

Empowerment Impact Increases women’s decision-making power  Pitt et al., (2006): Women’s participation in credit programs leads to women having greater role in household decisions, social networks, and greater freedom of mobility. Increase spousal communication about family planning and parenting concerns. Improvement in domestic interactions  Third party scrutiny of household abuse  Intervention with Microfinance for AIDS and Gender Equity (IMAGE) study demonstrated reductions in levels of intimate-partner violence in participants.

Evaluating Finance, Development and Empowerment Impact

Evaluating Financial Impact As MFI’s scale, the % of women clients decrease  Small scale – 75.3% women borrowers  Medium scale – 64.5% women borrowers  Large scale – 55.2% women borrowers For-Profit institutions tend to serve fewer women clients  Not for Profit – 71.9% women borrowers  For Profit – 54.5% women borrowers

Evaluating Financial Impact Women receive smaller loans and hence lower returns on investment  Negative correlation between Percent of Women Borrowers and Average Loan Balance Per Borrower

Source: MicroBanking Bulletin, Issue No. 12, April 2006

Evaluating Development Impact Women do not control all loans  Goetz and Sen Gupta (1996): 40% of women have little or no control over their loans Difficulty in scaling businesses due to limited resources (including skills and experience) Difficulty in scaling businesses due to greater risk and debt aversion

Evaluating Development Impact Income generation responsibility may lead to heavier workload and more stress  Mayoux (1999): Lack of substitute care for children and elderly leads to added pressure

Evaluating Empowerment Impact Pressure to pay back loans can lead to domestic pressure and violence  Contrary to the IMAGE study, per Rahman’s study 70% of women expressed increase in violence (based on one village) Limited empowerment outside the household  Mayoux (1999): Less evidence of socio- political empowerment due to presence of inflexible social norms and traditions

Evidence (Asia and Africa) on married women Limited control over investment decisions and returns Heavier work load and increased stress Increased incidence of violence by men against their entrepreneurial wives

Anecdotal Evidence From Southern Mexico Informational asymmetries Externalities Insecure “hiding places” “Mixed” groups more attractive to women  Higher repayment rates

In Line With Widespread Concerns “…male exclusion can lead to negative consequences for women who join financial services: they may meet resistance from men who see their exclusive participation as unfair and threatening; their loans may be hijacked…A family whose adult members all have access to financial services is better off than one where half are ineligible.” Hugh Allen at the Microfinance Forum 2006

Impact Evaluation (Joint work with Innovation for Poverty Action Researchers) Field experiment in Southern Mexico Objective: By inviting husbands as clients, will they more easily internalize their wives’ concerns? In particular: Health? Education? Child labor? Frictions between household-heads? Scale of business? Repayment rates?

Experimental Design: Key Features Baseline Survey 2000 interviews with married women clients of Grameen Trust Chiapas Enables to have basic knowledge of: General demographic situation, Income, Health, Labor and education, Household decision making of indigenous populations

Randomization, Design & Implementation 511 groups have been “randomly” assigned Women invite their husbands Women invite other women (incentives) Women increase their loan size Women invite their husbands (incentives) And A “Control” Group

A Major Undertaking Training branch managers and loan officers Deal with “unhappy” groups Staggered contracts Dynamics across groups Record keeping

Where This Research Might Lead… Inclusion of male household heads in microfinance can: (a) Enable women to become more efficient? (b) Help to eliminate “frictions”? (c) Help women to meet their health/education objectives more easily?

Policy This research might revolutionize current (and potentially misleading) notion of “empowerment” in microfinance, and deliver a message for practitioners and donors: Design a “microfinance product” whereby women will have their husbands/partners by their side for higher income, health, and education in their households

This is part of a much larger research agenda Find out what works and what doesn’t in the microfinance arena for meeting the MDGs on poverty reduction, gender equality, health and education -  Next Class: Armendáriz-Morduch (Chap. 8) On “Measuring Impacts” The MDGs