1. WOMEN AND MICROFINANCE P.V. Viswanath

2. Learning Goals  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?

3. History  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  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.

4. Commercialization and Gender  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.

5. Gender and repayment rates  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?

6. Gender and Repayment Rates  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.

7. Gender Differences in Rates of Return  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.

8. Microfinance and female empowerment  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.

9. Microfinance and female empowerment  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.

10. Gender focus in Microfinance  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

11. Gender focus in microfinance  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.