Business & Finance Economics

Empowerment of Women Through Micro-Credit

Economists have pondered over the effectiveness of the provision of micro-credit as a mechanism for ameliorating the socio-economic conditions of women in poverty and tackling gender inequalities through fairer distribution and access to financial resources.
Theoretically, provision of micro-credit should empower women in 3 key ways - a) independent sources of income outside the home, thereby reducing dependency and enhancing autonomy, b) exposure to new ideas, values and social support that should encourage their assertiveness, c) enhance women's status, such as in the eyes of their husbands, that may promote greater discussion and cooperation over use of resources.
A dramatic increase in women's credit schemes has occurred since the start of the 1990s.
Indeed, empirical data has suggested a positive correlation between credit availability and women's empowerment.
However, in practice, the implementation of micro-credit schemes has not been successful or significant enough to be considered a key solution to achieving women's empowerment.
The provision of micro-credit has the objective of advocating entrepreneurship, specifically to those in poverty who do not qualify for traditional forms of credit.
Muhammad Yanus, awarded the Nobel Peace Prize in 2006 for his work in the area, encouraged the perpetuation of microfinance as a tool for socioeconomic development, in particular the generation of employment for vulnerable parts of society with entrepreneurial zeal, such as oppressed women in poor countries, who lack the credit history and collateral to qualify for traditional forms of credit.
Micro-credit has enormous potential as a tool for poverty alleviation.
Start-up funding for equipment and materials was also made available.
Due to the success of micro-credit, large scale financial organisations have begun to invest in microfinance projects as part of their strategy agenda for long term growth.
In order to assess the power of micro-credit for empowering women, a definition of empowerment is necessary to elucidate this concept.
The core elements of empowerment have been defined as agency, i.
ability to define one's goals and partake in decision-making and negotiation, awareness of gendered power structures, self-esteem and self-confidence.
Empowerment can take place at an individual, household or community level.
According to UNIFEM, gaining the ability to generate choices and exercise bargaining power, developing a sense of self-worth, a belief in one's ability to secure desired changes, and the right to control one's life are important elements of women's empowerment.
There are two key processes that have been identified in order to advance women's empowerment - social mobility and economic security.
The poor often have short-term liquidity needs for consumption smoothing.
For example, during the Asian economic crisis, self-help microcredit groups served as important safety nets.
A high proportion of the funds made available for self-help microcredit schemes were utilized by women, enabling them to meet subsistence needs during difficult economic times.
An important indicator of empowerment is the ability to make decisions within the household.
Through micro-credit schemes, women have greater personal income, and this has helped to increase mobility and therefore employment potential of women who no longer have to solicit permission from their husbands beforehand.
Furthermore, the issue of financial sustainability of micro-credit on women's empowerment must be considered.
The financial self-sustainability paradigm, promoted by the World Bank, UNDP and CGA, argue for the targeting of women for micro-credit schemes on the grounds of high repayment and the need to stimulate an underutilized resource.
It is then assumed that this increased economic empowerment will lead to increased wellbeing of poorer women and also to social and political empowerment.
Therefore, through the provision of economic empowerment, there will be spill-on effects on social and political empowerment.
Women's micro-entreprise should lead on to increased employment and individual income.
This in turn allows better decision-making about consumption and investment leading to greater wellbeing for women.
Furthermore, through greater status within the household and community, poorer women will acquire more negotiation power and partake in wider movements for social and political change that will reinforce empowerment of women beyond mere financial capability.
However, the usefulness of micro-credit schemes as a means of empowering women is severely undermined by their lack of ability to achieve overall social transformation, lifting women out of abject poverty.
Indeed, it is widely recognized that micro-finance schemes have met limited successes.
The ability of a woman to transform her life through access to financial services depends on her individual situation, abilities, environment and the status of women as a group.
Control of capital is only one dimension of a complex process of empowerment.
Unfortunately, benefits of micro-credit are undermined by disadvantages faced by women in accessing information, social networks, and other resources they need to succeed in business.
A study of the impact of micro-credit schemes in Bangledesh revealed results of only 21% of respondents becoming empowered.
Out of socio-economic factors explored, they concluded that women institutional participation, media exposure and family land holdings were the more important requirements for women empowerment than availability of credit.
Some critics have argued that the majority of microfinance programs are structured in such a way as to have their greatest impact in helping women perform traditional roles better.
They argue that by emphasizing the benefits that women's families receive from their access to credit and making sure this does not not interfere significantly with their traditional duties, microfinance institutions may reinforce traditional gender roles rather than alter them.
It is impossible to ignore other factors that play a greater role in women's empowerment than mere financial opportunities.
Empowerment of women depends on power that is deeply rooted in our social systems and values.
It is unlikely that any one intervention such as the provision of credit will completely alter power and gender relations.
Women often value the non-economic benefits of a group-lending program as much as or more than the credit.
Some of the most valued benefits include expanded business and social networks, improved self-esteem, increased household decision-making power, and increased respect and prestige from the community.
No longer can this strategy be reduced to simple income-generating activities through revolving funds, but rather it entails and includes other elements of empowerment such as leadership, self-management, networking and entrepreneurship.
Even when micro-credit products target primarily women, they still face considerable disadvantages relative to men because of more limited business networks and opportunities, greater domestic burden, weaker self-confidence, less education, and, in many cases, a restrictive legal environment.
Another important issue is inequity issues within groups of women, including exclusion of the poorest spectrum of women from availability of credit.
Microcredit is made available to groups, based on collective collateral, which often discriminates against the very poor, who are perceived as being poor credit risks.
Therefore, even financially sustainable micro-finance may hinder women's empowerment if such programs restrict participation and drives increasing inequalities among women themselves.
The statistics have indicated that micro-credit programs have profoundly increased the economic empowerment of women, such as the provision of loans for business start-ups that were previously unattainable for underprivileged women in poorer countries.
Credit availability and generation of employment opportunities are fundamental stepping-stones to further social and political empowerment of women.
However, the process of achieving overall social transformation and gender equality will require more time for long-term outcomes.
Micro-credit is a relatively new conception and its implementation methods don't always achieve their intended outcomes.

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