Gender and Microfinance Lecture

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Gender and MicrofinanceLecture 8Week 2
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Structure of this class

• Reaching Women
• Why Women?
• Evaluating Impact
• Can one re-define gender empowerment?

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Reaching Women

• 10.3 million in 1999 ? 69 million in 2005
• 570 increase
• 84.2 of total clients
• Quote-Rutherford (POP) SaveSafe

Source Daley-Harris, Sam (2006). State of the
Microcredit Summit Campaign Report 2006.
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Women Served
Source Daley-Harris, Sam (2006). State of the
Microcredit Summit Campaign Report 2006.
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Why Women?

• Women make up a large and growing segment of the
  informal-sector
• Women tend to be more credit constrained
• Commercial banks focus on men because men form a
  larger portion of the formal sector

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Source The United Nations, 2000. The Worlds
Women 2000 Trends and Statistics. Chart 5.13, p.
122
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Why Women?

• Financial Impact ?MFIs standpoint
• Development Impact ? Donors standpoint
• Empowerment Impact

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• Financial Impact Targeting women customers
  creates financially sustainable institutions

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Financial Impact

• Women are better customers
• Higher repayment rates
• Conservative in investment strategy more risk
  averse
• More vulnerable to peer pressure and threat of
  public humiliation
• Less access to credit which reduces risk of moral
  hazard
• Hossain (1988) 81 of women had no repayment
  problems versus 74 of men.
• Khandker et al., (1995) 15.3 of male borrowers
  were struggling in 1991 versus 1.4 of female
  (missing some payments before the final due date)

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Financial Impact

• Women are better customers
• Less mobile
• Reduces monitoring costs for bank as well as
  peer monitoring
• Enables women to attend repayment meetings (if
  applicable)
• Less argumentative
• Lower staff costs
• Institutions can hire more female staff

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• Development Impact Targeting women has a greater
  impact on social and economic development

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Development Impact

• Women are poorer
• UNDP Human Development Report (1996) 70 of the
  worlds poor, about 900 million women
• Women spend on household consumption as opposed
  to personal consumption
• Pitt and Khandker (1998) Empirical studies have
  shown that women are more likely than men to
  direct additional income to household consumption
• Working women contribute to economic growth

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Development Impact

• Women are more concerned about childrens health
  and education
• Pitt et al., (2003) Credit provided to women
  improves measures of health and nutrition for
  both boys and girls, while credit provided to men
  has no significant effect.
• Womens businesses experience higher returns to
  capital because of lower starting point

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• Empowerment Impact Targeting women reduces
  gender inequity and empowers women by increasing
  their decision-making power

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Empowerment Impact

• Increases womens decision-making power
• Pitt et al., (2006) Womens participation in
  credit programs leads to women having greater
  role in household decisions, social networks, and
  greater freedom of mobility. Increase spousal
  communication about family planning and parenting
  concerns.
• Improvement in domestic interactions
• Third party scrutiny of household abuse
• Intervention with Microfinance for AIDS and
  Gender Equity (IMAGE) study demonstrated
  reductions in levels of intimate-partner violence
  in participants.

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• Evaluating Finance, Development and Empowerment
  Impact

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Evaluating Financial Impact

• As MFIs scale, the of women clients decrease
• Small scale 75.3 women borrowers
• Medium scale 64.5 women borrowers
• Large scale 55.2 women borrowers
• For-Profit institutions tend to serve fewer women
  clients
• Not for Profit 71.9 women borrowers
• For Profit 54.5 women borrowers

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Evaluating Financial Impact

• Women receive smaller loans and hence lower
  returns on investment
• Negative correlation between Percent of Women
  Borrowers and Average Loan Balance Per Borrower

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Evaluating Development Impact

• Women do not control all loans
• Goetz and Sen Gupta (1996) 40 of women have
  little or no control over their loans
• Difficulty in scaling businesses due to limited
  resources (including skills and experience)
• Difficulty in scaling businesses due to greater
  risk and debt aversion

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Evaluating Development Impact

• Income generation responsibility may lead to
  heavier workload and more stress
• Mayoux (1999) Lack of substitute care for
  children and elderly leads to added pressure

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Evaluating Empowerment Impact

• Pressure to pay back loans can lead to domestic
  pressure and violence
• Contrary to the IMAGE study, per Rahmans study
  70 of women expressed increase in violence
  (based on one village)
• Limited empowerment outside the household
• Mayoux (1999) Less evidence of socio-political
  empowerment due to presence of inflexible social
  norms and traditions

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• Evidence (Asia and Africa) on married women
• Limited control over investment decisions and
  returns
• Heavier work load and increased stress
• Increased incidence of violence by men against
  their entrepreneurial wives

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Anecdotal Evidence From Southern Mexico

• Informational asymmetries
• Externalities
• Insecure hiding places
• Mixed groups more attractive to women
• ?Higher repayment rates

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In Line With Widespread Concerns

• male exclusion can lead to negative
  consequences for women who join financial
  services they may meet resistance from men who
  see their exclusive participation as unfair and
  threatening their loans may be hijackedA family
  whose adult members all have access to financial
  services is better off than one where half are
  ineligible.
• Hugh Allen at the Microfinance Forum 2006

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Impact Evaluation (Joint work with Innovation
for Poverty Action Researchers)

• Field experiment in Southern Mexico
• Objective By inviting husbands as clients, will
  they more easily internalize their wives
  concerns?
• In particular
• Health? Education? Child labor? Frictions
  between household-heads? Scale of business?
  Repayment rates?

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Experimental Design Key Features

• Baseline Survey
• 2000 interviews with married women clients of
  Grameen Trust Chiapas
• Enables to have basic knowledge of
• General demographic situation, Income, Health,
  Labor and education, Household decision making of
  indigenous populations

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Randomization, Design Implementation

• 511 groups have been randomly assigned
• Women invite their husbands
• Women invite other women (incentives)
• Women increase their loan size
• Women invite their husbands (incentives)
• And A Control Group

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A Major Undertaking

• Training branch managers and loan officers
• Deal with unhappy groups
• Staggered contracts
• Dynamics across groups
• Record keeping

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Where This Research Might Lead

• Inclusion of male household heads in microfinance
  can
• Enable women to become more efficient?
• Help to eliminate frictions?
• Help women to meet their health/education
  objectives more easily?

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Policy

• This research might revolutionize current (and
  potentially misleading) notion of empowerment
  in microfinance, and deliver a message for
  practitioners and donors
• Design a microfinance product whereby women
  will have their husbands/partners by their side
  for higher income, health, and education in their
  households

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The MDGs

• This is part of a much larger research agenda
• Find out what works and what doesnt in the
  microfinance arena for meeting the MDGs on
  poverty reduction, gender equality, health and
  education
• -? Next Class
• Armendáriz-Morduch (Chap. 8) On
  Measuring Impacts