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Does Microfinance Really Empower? A presentation by Manoj Bhusal

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  • 1. Does Microfinance Really Empower?
    A Study on the Contribution of Microfinance
    in Empowering the Poor Women of
    Northern Bangladesh
    8 November 2010
    By ManojBhusal
    Degree Programme in Social Services (DSS C23)
    Järvenpää Unit
    Järvenpääntie 640, 04400 JÄRVENPÄÄ- FINLAND
  • 2. Introduction to microfinance
    • Microfinance covers a broader range of financial services such as credits, savings, insurance, housing loans.
    • 3. Microcredit refers specifically to loans and the credit needs of clients (< $1,000)
    • 4. Entrepreneurial and life skills training, and advice on topics such as health and nutrition, sanitation, improving living conditions, and the importance of educating children.
    • 5. Today, microfinance has become a global phenomenon
  • Bangladesh: Birthplace of modern Microfinance, Nobel Peace Prize 2006
    Service providers: NGOs, government- banks, commercial banks and the Grameen Bank.
    30 million (poor) people served by two hundred thousand workers in more than 1000 MFIS
    Various models/schemes of microfinance
    Microfinance in Bangladesh
  • 6. RDRS Microfinance
    10th biggest MFI in Bangladesh, since 1990
    Almost 0.5 million microfinance beneficiaries
    20,000 groups, (82% female,18% male)
    1600 employees for MF, in 11000 villages
    Loan Size(normal): Tk. 1,000-20,000
    (€10- 200)
    (Micro-enterprise): upto Tk.3,00,000
    Interest Rate: 12.5% ,9% for ultra poor
    No synchrony between MF and Non-MF programs
  • 7. Bangladesh
    People’s republic of Bangladesh, established in1971
    A parliamentary democracy of 162 million people
    Densely populated, 45% below poverty line
    GDP (per capita): $520 (157th)
    Life Expectancy: 60.25 years
    Literacy Rate: 47.9%, strikes, turmoil, floods
    Main Religions: Muslim 83%, Hindu 16%, other 1%
    Agrarian economy: garment, jute, but also remittance
    Hit hard by climatic fluctuations! Rising sea level
    Source: Banglapedia, 2010; CIA Fact Book 2010
  • 8. 100th out of 128 countries in the 2007 Gender Gap Index (WEF)
    Labour force participation among women is 55% whereas that of male is 88%
    Women earn less than half their male counterparts
    Women literacy rate 31%, only 4% women join tertiary education.
    Paternal authority, polygamy still practiced
    Women in Bangladesh
  • 9. Research Objectives
    To find out the contribution of microfinance schemes in social, political and economic empowerment of the poor women in rural parts of northern Bangladesh.
    To identify the patterns of gender roles in relation to changing economic levels and the structure of power and control.
    To assess the effectiveness and outreach of NGOs and Microfinance Institutions (MFIs) in addressing the needs of the poor and providing services to them.
    To compare the degree of social participation and political awareness between the beneficiaries and non-beneficiaries of microfinance schemes.
    To find out the local proxy indicators of empowerment in the rural parts of Northern Bangladesh.
    To analyze the motivating factors for credit pursuit, the questions of credit ownership and control, roles and approaches of different funding systems and group as an empowering factor in relation to credit.
  • 10. Review of literature
    Few studies done on socio-
    political aspects, focus:
    outreach and repayment rate!
    Studies and materials of MFIs
    Conducting large scale research is expensive!
    Studies show mixed results
    No independent study was found from the research area.
  • 11. Microfinance does have the potentiality to significantly impact the lives of women by empowering them but that ‘is not an automatic consequence of women’s access to savings and credit or group formation per se. In many cases benefits may be marginal and women may even be disempowered’ (Mayoux 2005, 2.)
    Benefits of microcredit ‘manifested in better sanitary and health conditions and increased empowerment of women’ (Alamgir 2006, 102-106.)
    participation in microcredit program has no effect on women's ‘say’ in all but one domain of household decisions, i.e. decisions regarding major household purchases.’ (Asim, 2008)
  • 12. How to Measure Empowerment?
    “For a person to be able to say or do something differently involves some degree of choice. Having more choice, compared to the past, implies empowerment” (Davies 2000).
    Perception of empowerment is highly contextual!
    Five empowerment measurement case studies conducted by the World Bank in Indonesia, Nepal, Ethiopia, Honduras and Brazil was studied to design an EMF.
    Instead of complicated statistical analysis, ‘simple descriptive statistics and narrative reporting’ is more appropriate for empowerment measurement (Alsop, Bertelsen & Holland 2005)
  • 13. Variation between choices available as the crucial determinant of empowerment!
    1. Whether an opportunity to make a choice exists (existence of choice).
    2. Whether a person actually uses the opportunity to choose (use of choice).
    3. Whether the choice resulted in the desired result (achievement of choice).
    Social, Political and Economic aspects of empowerment
    Finding local proxy indicators of empowerment is important!
    Micro (household), Meso (societal) and Macro (state).
    1. Observation:
    • A non-participant unstructured observation
    (ethnographic field notes and video was used)
    • 11 Microfinance branch offices , 13 microfinance weekly group meetings, and 7 community based organizations (The Federations) were observed.
    • 15. Observation was used for identifying the best possible sample.
    2. Semi-structured focus group interviews:
    • For comparative empowerment study
    • 16. Five long term and five short term beneficiaries selected from the same locality.
    • 17. The sample represented the same locality, profession, age group, illiterate,
    • 18. The difference: No. of years of association with MFIs & loan amount
    4. Family case studies: Information oriented sampling
    2 ‘success’ and 2 ‘failure’ cases
  • 19. Study area
    One of the poorest regions
    Prone to flooding
    Women literacy 30.9%
  • 20. Economic Domain:
    -Very little difference between the economic choices available to both types of beneficiaries. (Credit is available for both with little outcomes, food shortage, 3 LTBs were landless even after 20 years of MF use)
    - Weak opportunity structure, not enough loan/educational opportunities
    - LTBs were able to build some assets (cow, goats, chicken), but STBs used
    the loan for consumption.
    - LTBs qualify for bigger amount of loan, but still the results were not
    - LTBs made some contribution to the household economy seasonally, but
    economic participation at market level was very weak.
    Key Findings
  • 21. Social Domain
    - Social/psychological domain of LTBs was better
    (Comparatively confident, were federation members,believed MF affiliation had somehow increased their worth in the family)
    • However LTBs and STBs both faced domestic violence and were not consulted while taking important family decisions
    “We are women and they are men. It’s been always like that. They are superior and have more power… My husband doesn’t beat me, but doesn’t allow me to go outside either. I go to the field with him, we work and come home together. I’m supposed to be either with him or at home, that’s my routine.” - A long term beneficiary
    “I think it’s quite normal to have some conflict in every family. Even rich people fight. But our fight doesn’t last long. We are so poor that if we don’t work together we won’t be able to eat in the evening and survive. Poverty and disaster unite us faster.” – A short-term beneficiary
  • 22. Political domain
    - LTBs were members of a local Federation and took some trainings
    - Both cast votes, but didn’t select their ’right’ candidates themselves
    - No political affiliation
    - don’t own any means of mass communication (such as radio/phone etc)
    - both value and participate weekly group meetings , STBs more
    focus on credit and deposits than other discussions
    - Think that ‘illiteracy’ has been the main obstacle toward progress
    - landlessness and disaster: the roots of poverty!
  • 23. Family case studies
    Shahanaz, 35
    - Grade 8 graduate
    - MFB for 8 years
    - From 1000Tk-20000Tk
    • Has ’enough’ land (jute, paddy,chilli)
    • 24. Has 4 cows, earns 500TK/days
    • 25. Has opened a bank account, made savings for children’s education!
    • 26. Son, daughter both go to private school
    • 27. Success: education, stable family background, land, supportive/educated husband
    • 28. Has higher risk bearing capacity
    • 29. Ruksana, 35
    • 30. Illetarate, has visual impairments
    • 31. Landless, rickshaw puller husband, 3 daughters
    • 32. First loan 5000Tk, all chicken died of bird flu
    • 33. 4 goats, 250 chicken, fish pond
    Coping with recent ’fish robbery’!
    • Earning goes to loan repayment, but is determined for a better future.
    • 34. Has enterpreunerial spirit, but risk bearing capacity is very low.
  • Conclusions
    • Even after several years of MFI affiliation, there has not been significant increment to the choices they have and the level of control and power they possess.
    • 35. LTBs exercised a slightly improved opportunity of social mobility and an added value of self-worth, but failed to secure an enhanced economic future and challenge the longstanding issues of gender disparity and powerlessness.
    • 36. The link between microfinance and women’s empowerment is not as strong as generally perceived.
    • 37. Empowerment is a complex phenomenon and requires many components (education, family background, social structure, age, ethnicity etc.)
  • Microfinance was valued and taken as a pure and transparent financial service by both STBs and LTBs, their longstanding affiliation proves the same
    RDRS Microfinance reaches where others haven’t, provided loans to ultra poor also
    MFIs replaced traditional oppressive money lending system and have served people neglected by market oriented ‘formal’ financial institutions
    MFIs haven’t been able to fulfill the credit demand
    Impact differs: better off families get better results
    Consumption credit was valued by many
    Microfinance schemes were designed and marketed as products, beneficiaries were not consulted in decision making or service delivery
  • 38. A majority of beneficiaries didn’t have any plan, motivation or idea to develop themselves as women entrepreneurs.
    Microfinance in disaster affected areas seems to be counterproductive, relief is needed not credit!
    Tendency to start and stay smaller is common. IGAs are mostly traditional.
    Skill trainings and technical support were inadequate.
    Total dependency on microcredit seems to be less productive.
    Irrespective of financial activities, existence of microfinance groups was valued a lot.
  • 39. Credit was asked for one purpose and used for another, for instance, daughter’s weeding. MFOs should be aware of credit use.
    There should be more cooperation between MFIs in the region to minimize overlapping, information /experience sharing is needed
    Revision of weekly repayment system is needed.
    It is important to design and implement relatively long training and educational programmes with specific objectives.
    Promotion of independent academic studies is needed instead of ‘rejoicing’ self-reported success stories.
    Microfinance filed organizers (MOs) should receive more training.
    Failure of adult-classes? What about opting a different model?
    Work towards changing other structural issues such as land ownership, patriarchal domination
    Recommendations to RDRS
  • 40. Recommendation to MFA-Finland, FCA and other donor agencies
    Minimalist microfinance is not a panacea! It’s just a financial service.
    Successful microfinance needs to be combined with education and skill trainings, MFIs should get support for that.
    Focus should be on building capacity of the poor, not merely on raising income of the poor. Each MFI needs a separate training unit.
    MFI beneficiaries are vulnerable to disaster, a Disaster Reserve Fund is needed.
    More support for pro-poor research initiatives, e.g. rice research in northern Bangladesh
    An alternative or complementary model of microfinance could be providing subsidized credit and financial support to university graduates
  • 41. Sample population was rather narrow.
    Beneficiaries using micro-enterpreneurship loan were not included.
    Interviewing the respondents was sometimes challenging due to their husbands.
  • 42. 3 months of field work, basic understanding of Bengali, Familiar with the concept.
    Trust building was easy because of Nepali background, didn’t have any expectations and fear.
    Validity method: Data triangulation
    Research Ethics: Informed consent, voluntary partcipation and confidentiality
    Reliability, Validity and Ethics
  • 43. Got insights into the practicalities of conducting a research work.
    Developed a better understanding of qualitative research
    Skills such as listening skills, empathy, the use of proper language, are important!
    Not only what they express, but also how they express is important.
    Professional development
  • 44. Research, my friend,
    is not easy!!
    ...Thank You...