The United Nations Capital Development Fund (UNCDF) reports that women’s access to microfinance improves overall economic activity in poorer regions, causing economic growth, since women make up 70 percent of the 1.3 billion people living below the poverty line. Access to savings and credit are believed to increase investment and productivity, access to markets and overall income.
Approximately eighty percent of all micro credit loans are given to women. This includes self-sufficient and fund-dependent MFIs. Women are often targeted by MFIs for financial reasons: statistically, women served by microcredit have higher repayment rates. USAID reports that from their microfinance programs serving 3.5 million clients, with USD 1.3 billion in active loans in 1998, a client base of 84 percent women maintained repayment rates of 95 percent.
A review of data collected in a survey by the MicroBanking Bulletin in 2000 reported that financially self-sufficient MFIs who participated in the survey had a client base that was 61 percent female. The two highest profitability peer groups had women clients of 68 and 82 percent, thus indicating that financial sustainability can be maintained while focusing on women clients.
According to a March 2005 Swedish International Development Cooperation Agency SIDA report, India’s Self Help Group Bank Linkage model, which has reached more than 120 million clients since the 1990s, targets women with an estimated 90 percent women client base.
The United Nations Capital Development Fund attributes women’s higher rate of repayment to the fact that women on average have less access to credit than men and are thus more committed to micro-business endeavors. They further suggest that targeting women in microfinance improves the local economy, because of their involvement in local retail and marketing activities. Because microfinance clients generally service the local market, using local resources, these micro-businesses have a significant effect on the local economy.
Another positive economic impact of women microfinance clients is that the extra income generated from women acts as a financial safety-net for their households and the local poor community in times of economic instability. While men are more commonly involved in the formal sector, in times of economic crises, men’s salaries are most affected. Income generated by women’s small household businesses can potentially ease economic stress.
In an economic impact assessment published in the Journal of Developmental Entrepreneurship in 2002, Project HOPE in Portoviejo , Equador, a women-specific microfinance institution was evaluated for its effect on the local economy. Because women entrepreneurs involved in the program purchased their raw materials for their businesses locally, they had a direct positive economic impact on the community, increasing local community income, which then had a positive effect on the women clients’ retail businesses, as local buying power also increased.
By Melissa Duscha
A Brief Survey on the Impact of Microfinance on Women, 3-Part Series:
- MICROCAPITAL STORY: A Brief Survey on the Impact of Microfinance on Women Part 1of a 3-Part Series: Targeting Women and its Effect on the Wellbeing of Poor Families
- MICROCAPITAL STORY: A Brief Survey on the Impact of Microfinance on Women Part 2 of a 3-Part Series: Evidence of Women’s Empowerment
Business Today: Fighting Global Poverty with the Click of a Mouse
The Grameen Foundation: Measuring the Impact of Microfinance: Taking Stock of What We Know
Linda Mayoux Website: Genfinance
Swedish International Development Cooperation Agency (SIDA): September 2006 Division for Market Development: Evidence from the self help group bank linkage programme in India: Microfinance and Women’s Empowerment
UNFC Publication: Supporting Women’s Livelihoods: Microfinance that works for the Majority
Uppsala University Department of Economics Working Paper August 2007: Does Microfinance Empower Women? Evidence from Self-Help Groups in India