- Microfinance has been extolled by donor agencies, development practitioners and policy makers as a tool for alleviating poverty and empowering women. Yet little systematic research has been done to assess the conditions and extent to which microfinance programs accomplish these goals. This essay provides an assessment of that research. Based on a comprehensive literature review of research from wide range of disciplines, I have synthesized evidence of impact of microfinance as a development intervention on the lives of women.
There are numerous factors that help and hinder the success of microfinance. As it is a market oriented approach, accessibility to the market plays an important role. The availability of basic infrastructure such as roads is essential for women to be able to sell what they produce. Furthermore, microfinance programs have been most successful when they that provide credit in conjunction with other financial services such as savings and loans or social development programs such as literacy classes, vocational and marketing training, and family planning.
Even though microfinance collateralizes social capital and makes credit accessible to the poor more than traditional banking institutions, some of the poorest women remain excluded, particularly those who might represent high risk in the eyes of other group members who evaluate the appropriateness of loans. Nevertheless, “Grameen Bank” style group-lending appears to be more successful than either individual lending programs or large group lending via “self help” groups.
In sum, microfinance in itself is not a panacea. It is contingent on both individual recipient attributes and socio-political and economic context. To achieve the goal of empowerment, equal attention must be given to girls’ education, skills development, formal wage employment and the legal and political rights of women.