The terms micro-finance institutions (MFIs) and women’s empowerment need to be defined before looking at the effectiveness of these entities in the activities of women.
Microfinance has been defined as provision of financial services to low income individuals by diverse service providers (“What is microfinance?” par. 1). These services avail and at the same time administer small amounts of money to these individuals in various methods e.g. loans, savings, insurance and transfer services (Asiama and Osei par. 8). This is normally likened to microcredit which has a different meaning; provision of small loans to the unemployed by licensed institutions with little emphasize on security (“What is microfinance?” par. 2).
These services cannot be enjoyed by the individuals from the conventional financial institutions i.e. banks thus the creation of entities to offer them services. Microfinance Institutions (MFI) offer these financial services to the poor and vulnerable (“What is a Microfinance Institution (MFI)?” par. 1). These entities are formal, semiformal or informal (“What is a Microfinance Institution (MFI)?” par. 4). Formal MFIs are regulated by the general laws, banking laws and any regulation concerning provision of financial services e.g. commercial banks, (“What is a Microfinance Institution (MFI)?” par. 4). Semiformal MFIs are not under banking regulations but are ran under general and commercial laws e.g. financial NGOs, cooperatives and credit unions (“What is a Microfinance Institution (MFI)?” par. 4). Informal MFIs are not under the named law regimes like self-help groups and rotating savings and credit associations (ROSCAs) (“What is a Microfinance Institution (MFI)?” par. 4).
The World Bank defines empowerment as:
The process of increasing the capacity of individuals or groups to make choices and to transform those choices into desired actions and outcomes. Central to this process are actions which both build individual and collective assets, and improve the efficiency and fairness of the organizational and institutional context which govern the use of these assets. (Swain p.63)
Empowerment depends on the grounds that point to the lack of power of the individuals and tied to this is the social and cultural setup that informs the different degree of empowerment of members of the community (Swain p.63).
Women’s empowerment is thus a process of availing the capacity of making life’s choices to those women who have been denied the opportunity (Swain p.64). This capacity is aided by three tools; resources, agency and achievements (Swain p.64). Resources refer to access to material, human and social resources while agency refers to the processes of decision-making; together they bring forth capabilities which in turn dictate the channels to be used by individuals in bettering their lives (Swain p.65). Achievement is the actualization of the first two tools where the results or the wellbeing is manifested (Swain p.64).
The feminist paradigm has empowerment as a holistic function; it goes beyond economic elements (Swain p.62). Gender interests are also at play with women’s empowerment seen both as a way of individual transformation and combined activity where the existing gender subordination is challenged (Swain p.62). The individual is changed so as she assumes the role of making one’s own decisions hence greater control over her actions. This will ultimately increase her self-confidence and self-esteem which further helps in changing the societal status quo (Swain p.63).
Reasons for empowering women
One of the reasons that support this venture is development; gender equality aids development and economic growth (Cheston and Kuhn p.7). In research done by global entities e.g. World Bank, UNDP and UNIFEM show that gender inequality inhibit economic growth (Cheston and Kuhn p.7). The World Bank reported that communities that discriminated against one gender had “slower economic growth, poor governance, greater poverty and lower living standards” (Cheston and Kuhn p.7). Microfinance avails working capital and training to women thus informs their ability to engage in economic activities hence contributing to the overall country’s economic state (Cheston and Kuhn p.7).
Women have also been found to be the poorer gender; the UNDP in its Human Development Report of 1995 had the percentage of women living on less than $1 at 70% (Cheston and Kuhn p.8). Further the World Bank has found out that women have a higher unemployment rate than men in most countries and thus are the majority in the informal sectors of most economies (Cheston and Kuhn p.8). Another way of viewing this aspect is in terms of the households where the woman is susceptible to be poor. The discrimination of the males in their homes make the women more vulnerable to unfavorable economic returns and if they succumb to poverty then they have little hope of bettering the situation (Cheston and Kuhn p.8). When the financial help is accorded to such women, their exposure to poverty is greatly checked and can turn into empowerment as the woman becomes more assertive in affairs around her (Cheston and Kuhn p.8).
Unlike men, women spend more on their households and family needs hence when they are helped to increase their finances hence many more people benefit (Cheston and Kuhn p.8). The women would take care of their children’s education, diet, healthcare, buy household items and clothing (Cheston and Kuhn p.8). Men tend to partially provide for their houses while the women exercise generosity and this means that there is more money in houses where the woman can earn for diverse uses (Cheston and Kuhn p.9). They hold the shared welfare of the household at a higher regard than their own personal interests (Cheston and Kuhn p.8).
Being in the financial business, MFIs prefer women because of efficiency and sustainability; they repay the money loaned at a reasonable time and do cooperate with the laid down procedures (Cheston and Kuhn p.9). A MFI in Ghana observed that men formed the least group of clients but had the highest arrears rate (Cheston and Kuhn p.10). The reasons to this were that the men were competing with each other hence took risks like selling their goods on credit, they were difficult to control, not keen on meeting and did not value mutual guarantee of the group which was imperative (Cheston and Kuhn p.10).
Access to financial help has been given a human rights approach and it is contained in a number of human rights instrument (Cheston and Kuhn p.11). The Convention on the Elimination of Discrimination Against Women (CEDAW) and the Beijing Platform for Action (BPFA) has provisions aiding women to access financial services (Cheston and Kuhn p.11).