Microfinance loses effectiveness
Empowering poor by lending small amounts particularly to women is considered to have an effective poverty-reducing impact but research has shown that the effectiveness of microfinance is lesser in man-dominated societies.
It has been established that ideal gender parity is absent even in the most developed economies. Women are still discriminated in promotion, elections and corporate boards even in countries like the United States or Canada. In every country around the world, women outnumber men in poverty.
Dominance of men varies in different societies. Patriarchy could be in the family, profession and religion. It suppresses the women and microfinance lenders find it hard to lend them due to various reasons, which include difficulty in attracting resources and female customers and recovering credit. One cannot, however, neglect the impact of loans provided by small microfinance institutions to the poor women in developing economies.
The success of microfinance in Bangladesh rekindled hopes of a similar turnaround in other poor countries. While lending to poor women the small lenders have to take into account not only the impact of men-dominance in the society but other sources of inequality as well.
Men-dominance in some countries is stronger in some sectors and comparatively weaker in others. For instance, in Pakistan and Bangladesh there is a men-dominance in religious and family matters, but the influence of women is comparatively equal in professions and government in Bangladesh. The post of prime minister in Bangladesh has been rotating between the two women for the past 15 years. This has increased the outreach of women in Bangladesh compared with Pakistan.
More than 80 percent of the workers in garment industry in Bangladesh are women, while only 10 percent garment workers in Pakistan are from fair gender. Garment industry in Bangladesh is the largest provider of decent salary and industrial jobs and women dominance in the industry has empowered them nationally. This empowerment of women in Bangladesh has made microfinance a global success story.
In Pakistan, most of the low wage work is performed by women as is the case in India as well. The low impact of microfinance in these two countries is because of almost total male dominance in the society.
It is essential for microfinance lender to take into account factors, like patriarchy and other sources of inequality instead of paying attention to just economic factors. The success rate of microloans will be higher if microfinance products are designed after considering all the factors impacting poverty. Since the aim of microfinance is to pull people out of poverty, it is necessary to understand factors from where this poverty arises. While addressing the issues faced by poor women, the micro lender should analyse the root of those issues in the society. It should then find a way to make the microloan beneficial for the downtrodden.
It is generally perceived that gender equality is higher among the weaker segments of society. However, a deep analysis will reveal that this is not true. We see male dominance in all the societies when it comes to religion, ethnic, and linguistic fractionalisation. The religious leaders are predominantly men. Most political leaders around the world are men. There is a strong element of patriarchy as far as corporate heads or board members in corporate entities are concerned. The microfinance leaders should look into the reasons why despite this universal dominance of patriarchy, some societies are less discriminative against fair sex than the others.
Grameen Bank has shown the way to the micro lenders to successfully operate in a male dominated society. There is a lot of ground to be covered by the microfinance institutions of Pakistan. They have to find out a way to operate poverty-ridden society, addressing the issues of gender or other forms of systematic discrimination.
They must realise that when poverty is based on gender or other forms of categorical inequality it increases the transaction costs as they try to reach their targeted clients. They should design their program prudently as in such cases it would be much more expensive to try and address poverty. Instead of abandoning their programmes halfway, they should make sure that these programmes are sustainable.
The size of microfinance institution matters. Grameen has attained a size where it could carry out a mixture of high and low cost microfinance and survive on average. The microfinance institutions in Pakistan are too small to take up challenging microfinance initiatives.