Micro-credits - A Way to Empower Women?
by Jennifer Geiser on March 28, 2015 - 3:10pm
When we had our session with Ulrike Haupt who works for "Menschen für Menschen" in Ethiopia we discussed among other things the issue how women can be empowered in a patriarchal society. In her opinion, one tool to give autonomy to women is the lending of micro-credits. I want to give further information on the topic of micro-finance and discuss if it is a means to empower women.
We as members of welfare states often try to find a way to change poor situations in other countries for the better. Obviously, the intervention by foreign nations is a delicate topic, especially when it comes to the case that "developed countries" try to impose their values and standards on the people of "developing countries". Thus, we need to find methods to support people of these states to act by themselves. Micro-credits are a way to do so. Especially, micro-financing is believed to empower women and ultimately to transform the patriarchal structures.
What is a micro-credit?
Micro-credits trace back to the Bangladeshi Mohammad Yunus and his Grameen Bank which was opened in 1983 in order to "reverse[...] conventional banking practice by removing the need for collateral and create[...] a banking system based on mutual trust, accountability, participation and creativity."  Most of the people supported by the Grameen Bank did not have a possibility to get loans from a common bank and needed to get their money from lenders who imposed high interests on the loans. As a result, many people got into high debts. For his idea of a financial institution for the poor, Mohammad Yunus and the Grameen Bank received the Nobel Peace Prize in 2006 "for their efforts to create economic and social development from below". 
On the official website of the Grameen Bank, it is claimed that a "[micro-]credit is a cost effective weapon to fight poverty and it serves as a catalyst in the over all development of socio-economic conditions of the poor"  Generally, the goals of micro-financing institutions are the alleviation of poverty, the promotion of business activities as well as the empowerment of women, the promotion of gender equality by giving women the chance to gain power in the household's decision making and an improvement of the health and education of their children. But are micro-loans really more than just a financial instrument and do they have the potential to empower women?
Do micro-credits improve women's situations?
Micro-credit institutions constantly affirm that the lending of micro-loans has a positive impact on women's empowerment and the situation of their children. The Grameen Bank's borrowers consist to 97 % of women  and a lot of micro-credit institutions lend to women exclusively. A reason for this tendency of exclusively lending to women is that women mostly accept smaller loans and they have higher repayment rates than men do. Women are more likely to spend their money not only on consumer goods but also on long-lasting goods as well as on the welfare of their families. However, numerous studies conducted in developing countries show that all in all, there is no evidence that micro-credits have any effect on women’s empowerment.  Some studies even argue that micro-financing has negative externalities.
One example of such a study is the survey "The Limits of Microcredit - A Bangladesh Case". According to this study, women are often not the beneficiaries of the loans. They often have to give the money to their husbands and they are even used specifically as providers of money. One respondent of the study told the conductors that “[w]omen take micro-credit as their husbands order them to do so. When their husbands fail to pay the installment, then NGO workers abuse the women a lot. Women have to bear the pressure coming from both sides.”  Thus, women do not benefit from the loans and even have to take the financial risk that comes with the credit. Another finding of this survey is that micro-credits worsen the dowry system in Bangladesh - a system which was meant to be abandoned by micro-financing. Apparently, the increasing lending of money has brought about the phenomenon that the dowry prices rise. Many women spend their loans on the dowry of their daughters. There are even cases where women have to give up their homes in order to pay back the loans they previously spend on the dowry. 
How can micro-financing be improved?
In order for micro-loans to really have a powerful impact on the empowerment of women, it has to be accompanied by additional means. A remarkable model, as an example, is the one applied by Finca Peru, a social business and micro-finance institution with around 16,000 micro-borrowers. To extend the influence of their loans, Finca Peru offers a broad program additional to the lending of credits: They have initiated numerous "village banks" in which weekly meetings are organized. In these gathering, the borrowers learn "to manage their finances, learn business tricks, study accounting and sales techniques, contribute to their savings, buy life insurance and support each other."  The institution also implemented several methods to support the women they lend money to:
"-One, recognizing that financial opportunity requires financial literacy, Finca Peru is educating young children about the basics of money management and saving. -Two, health programs cover pap smears, gynecological exams, diabetes detection, nutrition education, optometry and more. -Three, for its members, Finca Peru awards university scholarships to daughters who earn good grades. -Four, noting that savings "allows our members to better overcome emergencies, improve housing conditions and educate our children," members create self-run, self-help savings circles." 
Another approach, which could lead to a more effective usage of micro-credits, is to make the concept of micro-financing male inclusive. Particularly in patriarchal societies this is crucial. Involving men could mean that micro-financing institutions do not exclusively give money to women, that husbands are involved in the lending process and that there must be general education towards the promotion of respect towards women. Additionally, the lending institutions have to become more aware about the influence the men have on their women and ultimately, they have to decide about the loans keeping this fact in mind.
Although the goals of micro-financing institutions are noble, a lot of their aims - among them the aim of empowering women - have not been achieved. There seem to be methods to change the concept of micro-credits so that they have a more effective impact on the empowerment of women. However, as micro-loans are just one of many market-based development strategies, the expectation that it can transform poor countries may be set too high. As three prominent economic professors put it in the New York Times: "[M]icro-credit seems to have delivered exactly what a successful new financial product is supposed to deliver—allowing people to make large purchases that they would not have been able to otherwise."