Women: active or latent beneficiaries of microfinance?

Byline: Amna S. Sandhu

Microfinance in all its glory over past few decades has been crowned as an important tool for women empowerment. A study published in Applied Economics Letters found that in an average developing country, a 15 percent increase in proportion of women accessing microfinance could potentially reduce gender inequality by half.

Microfinance has been a popular tool to promote women empowerment because of an assumed inherent model for poverty alleviation specific to women. Extensive research has been conducted globally to establish this link between microfinance and poverty alleviation. And there is significant evidence to support the overall socio-economic benefits. As primary access to credit is expected to trigger the virtuous spiral of economic empowerment, social liberation as well as legal and political awareness.

In terms of economic benefits, women who attain microfinance are reportedly engaged in income-generating activities that make them financially independent and offer benefits such as higher per capita consumption, increase in household spending and increase in household savings.

Additionally, research on Microfinance also seems to have found social advantages for women. Given the cultural building, especially in the developing countries like Pakistan, having access to credit raises the perceived status of women in the society. Reportedly, there is a significant change in the decision-making powers of women especially in the matters of household consumption, savings and spending on health and education for children.

However, research has also yielded conflicting evidence as simply providing access to credit will not empower women on its own. As seen in the peri-urban areas of Pakistan, in many instances the only role women play in microfinance, is having their name on the application. Many microfinance recipients use their loans to support the male members of the family. The female is a registered applicant as she has better chances of being selected as a microfinance beneficiary given that many microfinance programs are women specific.

The field study, I was part of, found that almost 46 percent of women responded that applying for the loan was their own initiative, however, almost 94 percent reported that they needed permission from a male member to apply for the loan. In most of the cases, it was the husband or the father who took decisions related to all aspects such as applying for loans to loan usage and...

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