CHAPTER 3: LITERATURE REVIEW
3.4 M ICROFINANCE AND W OMEN
Microfinance is thought to be beneficial, especially for women, but it is also said to improve gender equality while empowering women. Women are frequently regarded as poor and are the target of microfinance, making them the majority of loan beneficiaries. Women are the entry point of many households because they spend more in the welfare of their families than men. This includes health care, education, clothing, shelter, and other household goods . As a result, women are an appropriate target group for poverty alleviation, with the social impact of development strategies such as microfinance being maximized. Khanam (2018) and Yunus (2003) discuss microfinance as a strategy for empowering disadvantaged people around the world with the goal of alleviating poverty, among other things. In terms of gender,
microfinance is viewed as a tool for allowing women to live a more contented life, free themselves from household constraints, and gain access to the outside world. This can also be attributed to women's individual characteristics, such as economic activity, individual choice, and productivity, with the goal of empowering them through changes in gender relations and power structures (Bisnath & Elson, 1999).
The following section discusses microfinance and poverty, microfinance and female empowerment, and how microfinance and education can improve gender equality.
Understanding women's better lives is primarily concerned with poverty, strategies for improving their well-being or standard of living, and communities (Sneeringer, 2017).
Because there is no universal definition of poverty, this study defines poverty as a person’s inability to meet basic physical needs such as food, clothing, and shelter. An individual is considered poor if their income falls below the level required to meet basic needs
(Kamruzzaman, 2014), and the term “poor” is sometimes used to refer to people who are unable to obtain credit from commercial banks, typically due to a lack of collateral or guarantees (Moseley, 2001). However, a broader perspective defines poverty in terms of individuals who are deprived of their capabilities, with the goal of alleviating poverty by improving the poor’s experiences (World Bank, 2012c). From this perspective, poverty is the deprivation of opportunities and the ability to improve one’s life and choices (Sen, 1985;
64
1999), and of the ability to participate successfully in societies (Chambers, 1994). Sen (1985;
1999) is considered the founder of this perspective. He further contends that the correct approach to assessing people's well-being is their ability to live a life that we have reason to value, rather than their wealth of resources or subjective well-being. However, before we can begin assessing people's capacity, we must first determine which functions are important to a good life, or we must specify an assessment procedure to determine this. As a result, while this study acknowledges that this approach is concerned with people's well-being, in my study, as discussed, I have used the concept Buen vivir.
The literature indicates that women have been able to take themselves out of vulnerability and poverty by using credit in a sustainable way (Banerjee et al., 2017; Morduch et al., 2002).
Al Mamun et al. (2014) in Malaysia discovered a positive impact on household income and poverty reduction in Malaysia, whereas Ghiliba et al. (2014) discover a positive impact on household expenditure.
However, other researchers in Sub-Saharan Africa discovered that microfinance does not automatically alleviate poverty and has a number of negative consequences (Rooyen et al., 2012). As a result, it is evident that microfinance mechanisms are different among different countries, as well as in rural and urban areas of the same country. Such differences may be caused by factors such as group solidarity, business size, financial service, and financial management skills. Thus, the impact is found to be greater in rural areas, indicating that access to business training affects women's household income and that women with business knowledge are able to make profit and increase their business returns (Armendáriz de Aghion et al., 2010). For this reason, access to credit is still seen as a vital tool for economic
empowerment of poor people and to alleviate poverty (Akhter & Cheng, 2020).
Women’s empowerment has attracted many development agencies as a strategy for poverty alleviation and a development agenda that can successfully better people’s lives (World Bank, 2015). It can be observed that when women's socioeconomic conditions improve, empowerment is enhanced through microfinance interventions (Akhter & Cheng, 2020).
Mayoux (1999) argues that microfinance by itself generates economic, social and political empowerment without it being considered necessary to develop explicit strategies to address other scopes of poverty or gender. Indeed, one scholar asserts that microfinance programmes came as development approaches to ensure that gender becomes a lens to facilitate the power within, power with and power to, so that women can change social actors and structures in
65
order to have equal development opportunities (Cornwall, 2016). However, it is extremely difficult to assess women's empowerment because it is typically defined by a specific cultural context. Therefore, one of the projecting definitions of women’s empowerment is the
expansion of people's ability to make strategic life choices in situations where they were previously deprived (Kabeer, 1999). Women's empowerment in relation to microfinance has received a lot of attention in the context of microcredit schemes.
Women who participate in decision-making processes have the ability to contribute to their household's well-being (Duflo, 2012; De Brauw et al., 2014). Thus, economic influences could improve empowerment. Furthermore, microcredit has the potential to make a significant contribution to gender equality by promoting sustainable livelihoods and better working conditions for women (Noreen, 2011). Access to microcredit as part of microfinance services for women may thus result in changes in attitudes such as increased self-reliance, power relations within their households such as control over resources, and social status.
Empowerment strengthens innate ability by gaining knowledge, power, and experience (Vaessen et al., 2014). Hadi et al. (2015) assert that when combining the financial services, such as training and loans, they have the potential to empower beneficiaries by assisting them in developing the business skills and entrepreneurship understanding that is needed to carry out their daily activities. Furthermore, education and access to financial services are regarded as critical to the long-term viability of microfinance programmes (Wamaungo, 2011).
3.4.1 Argument on Women, Poverty and Economic Growth
Women are often categorised as marginalised, especially among the poor who lack resources as compared to men and are the primary target of microfinance loan beneficiaries (Rahman et al., 2017). Women are thus a suitable target group for mitigating poverty and take full
advantage of the social impact of developmental strategies for many developing countries (Brana, 2013). Thus, there are many development programmes aimed at alleviating poverty and enhancing many informal sectors that are used by women to earn income through the provision of credit. Women are the entry point to household security, as they generally
contribute more in the welfare of the family compared to men. For example, women take care of expenses for education, health care, clothing, shelter and household items. Subsequently, women are a lower credit risk and there are greater possibilities that they will share the benefits of the loans with other family members, especially children (Vaessen et al., 2014).
66
It is argued that microfinance can lead to national economic growth because it can help to grow small, medium, and micro businesses, which then contribute to the national economy through job creation, income generation, and wealth creation (Peprah, 2012). Thus, by providing financial assistance to low-income households, microcredit helps to rebuild social and economic structures at the grassroots level (Rahman et al., 2017). Furthermore, it is argued that microfinance services lead to women's empowerment by empowering women's decision-making and power in their homes and socioeconomic status (Kato & Kratzer, 2013).
Microfinance allows women to achieve financial independence, which can lead to increased learning opportunities as they become more aware of how to improve their lives. These are all indicators of empowerment.