On 13-14th November a unique workshop, supported by the RDI Network, brought together a range of academic and practice experts to unpack claims regarding the empowering effect of microfinance for women.
As the conveners pointed out, much has been written about the empowerment of women through microfinance by the finance institutions themselves and the aid and development organisations delivering the programs, by academics from various fields, and also by activists and advocates for women. Different perspectives highlight that while some may argue that microfinance programs work to achieve poverty alleviation and women’s multi-dimensional empowerment, others argue that microfinance does nothing to change the structural conditions that create poverty and are not a silver bullet for the empowerment of women.
Thank you for the opportunity to present from my practice something for academics and researchers to take away and consider. For me, I have learned a lot to help improve the self-help groups back in the Solomon Islands.
Enif Petsakibo, Live and Learn Solomong Islands
Bringing different perspectives to the workshop, participants came from a range of backgrounds, including academics and researchers of development, anthropology and economics; PhD candidates; and practitioners from international, Australian, Asian and Pacific NGOs and CSOs. The depth of knowledge and experience from researchers and those working in developing countries made for rich discussion and debate on the topic. In particular; the presence of Heloise Weber, a widely published author on the global politics of development and microcredit; Melissa Johnston’s thorough knowledge of microfinance and Timor-Leste; as well as Sophie Romana’s extensive experience of working with savings groups in 13 countries for Oxfam America, brought different perspectives to the room.
Microcredit (extension of very small loans to those who typically lack collateral or a credit history, also known as microloans) is the predominant form of microfinance and is thought to be a central development strategy to alleviate poverty. One of the key criticisms pointed at this strategy revolves around its assumption that women are purely independent entities; economic research and proponents of microfinance fail to adequately consider the societal embeddedness of women in developing countries.
But the reality is that there is a complexity to household structure and often a gender imbalance in decision making within households that need to be considered. When it is not, there can be unforeseen negative consequences to microcredit schemes.
The use of credit or loans was most successful where it was used in business or agriculture to raise productivity. Increased productivity means that loans and interest are more likely to be able to be repaid, with extra left over to increase financial security. However, increased productivity was often found to be accompanied by increased workloads for women, particularly in the Pacific where many men having migrated to the urban areas or overseas to work.
Credit and loans were also found to often be used on things that may not have a direct economic return or are longer term investments, such as medical costs, weddings, and education for the children. This can cause ‘bicycling’ of debt, which involves using one loan to repay another. In addition, microfinance schemes were found to not be resilient to the shocks caused by natural disasters, which is of increasing concern in the Asia-Pacific.
The take home message from researchers in the room was that evaluations of micro-credit produce mixed results, with successful microfinance programs being strongly context and country dependant. An assumption of financial inclusion of women is simply not enough to guarantee multidimensional empowerment.
Micro-savings (where people in a community group deposit small amounts over time, also known as savings groups/self-help groups) are a small fraction of microfinance programs, but they avoid many of the issues identified above associated with microcredit.
The savings create a ‘smoothing’ effect, where participants are better able to handle small ‘shocks’ to their finances, and the group members benefit directly from interest accrued. It was agreed during the workshop that savings groups are also not the ‘silver bullet’, but can reduce and counter stresses caused by poverty.
In terms of empowerment, it was found that women-only savings groups provide a unique space for women to gain trust, social capital, and collective agency, which has potential flow on effects to their standing in the community. However, the savings groups can also entrench existing or create new power structures and forms of inequality in a community, and any empowerment seems to come not from the financial inclusion or savings, but from the potential of women’s collective agency.
At the end of the two days the group was given time to reflect on the discussion and to determine further research needs in the space. These outputs will be carried forward, and the RDI Network looks forward to sharing outcomes into the future.
The RDI Network supported the participation of Su Sandar Koe, Gender Coordinator in Improving Market Opportunities for Women in Myanmar with the Mennonite Economic Development Associates (MEDA), and Enif Petsakibo, Livelihood Officer for the Inclusive Natural Resource Management Program with Live and Learn Solomon Islands. The workshop was funded by the Academy of Social Sciences in Australia (ASSA) with assistance from Oxfam and the RDI Network, and was organised and hosted by Monash University.
May 2018 update: read more on the evidence regarding microfinance practice in this article by Dr Sara Niner, one of the workshop convenors – published on The Conversation, 24 May 2018.