Credit and savings schemes are hailed as blueprints for tackling poverty but their benefits are exaggerated. They fail to address the way gender effects relations of power and inequality within families. Frequently unsustainable, they seldom manage to cover their running costs. If future credit and savings schemes are to be effective in poverty alleviation they need to make stronger links between local economies and global economic trends and be linked to wider programmes of women’s empowerment.

A paper from Womankind Worldwide challenges the assumption that credit schemes are a cost-effective, efficient, easy-to-administer and sustainable method of poverty alleviation. Describing many microfinance initiatives as tokenistic, the author suggests that ensuring the sustainability of credit schemes is often as difficult to achieve as poverty reduction itself. Successes are overstated and there is a silence around the true financial and staff costs of running projects.

Although schemes are said to empower women the rationale behind the interest in women’s involvement is problematic. When agencies running micro-finance projects make women responsible for loan repayments they are using them as instruments to show donors that the schemes are efficient and sustainable. In effect, microfinance projects further increase the burdens on already poor and vulnerable women.

NGOs and women’s organisations co-opted into credit and saving schemes often become involved in a policing role. Focusing on ensuring high repayment rates to make schemes profitable, agencies lose sight of the reasons why individual clients encounter problems with repayments – constraints brought about by culture, tradition and the law.

Other shortcomings include:

• lack of co-ordination between various micro-credit schemes
• differing rules and regulations which confuse potential clients and allow people to play one scheme off against the other
• insufficient appreciation of how lack of resources, their roles within the family and the community and cultural prohibitions on particular activities limit the economic activities open to poor women
• channeling women into a limited range of narrow economic niches which are saturated and unprofitable
• failure to understand how wider forces can have an impact on microfinance schemes: for example, falling cocoa prices on world markets lead to high inflation in Ghana, making it hard for women traders to successfully repay small loans – in this case, credit facilities intended to reduce poverty actually exacerbated it.

Womankind and its partners are working to develop ‘microfinance plus’ programmes to more directly address poverty and vulnerability. Instead of simply training NGO staff and communities in the rules of credit and savings, women are encouraged to develop an understanding of how to make money yield profit more securely.

Training is based on experiential learning – learning by doing – and based on people's own experiences. Women are encouraged to say what they think they need to learn. They acquire locally relevant new skills in agriculture, livestock rearing, food processing and transport and are able to enter new markets.

Womankind urges microfinance agencies to:

• abandon the assumption that individuals can somehow escape poverty by simply trying harder – ‘pulling themselves up by their bootstraps’
• share more widely information on both good practice and failures
• adopt holistic approaches to livelihoods, providing a range of assistance beyond provision of credit
• realise that free trade and greater links to the global market do not necessarily lead to poverty eradication
• support local civil society organisations which are campaigning on behalf of the poor.

Microfinance will never be a magic wand in poverty reduction but it can be a strategic tool if awareness-raising, community micro-­interventions and policy work are linked together in a tactical approach.

Source(s):
‘Passing the buck? Money literacy and alternatives to credit and savings schemes’ by Helen Pankhurst, Gender and Development: Volume 10 Number 3, November 2002, pp10-21

id21 Research Highlight: 29 January 2004

Further Information:
Helen Pankhurst
c/o WaterAid
27-29 Albert Embankment
London SE1 7UB
UK

Tel: +44 20 7793 4500
Fax: +44 20 7793 4545
Contact the contributor: wateraid@telecom.net.et

Womankind Worldwide
32-37 Cowper Street
London, EC2A 4AP
UK

Tel: +44 (0) 20 7549 5700
Fax: +44 (0) 20 7549 5701
Contact the contributor: info@womankind.org.uk

Womankind Worldwide

Other related links:
'Self-help groups in India: Taking microfinance beyond just money'

'Microfinance: a weapon of mass empowerment for the unbankable?'

'Microcredit: killer weapon in the fight against poverty?'

'FINANCE-WOMEN: Microcredit Not the Only Answer' - World News

'Improving Women's Access to Credit in Community Development Programmes'

'Women's Participation in Microfinance'

The Microfinance gateway