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In September 2000, the member states of the United Nations unanimously adopted the Millennium Development Goals (MDGs). The MDGs commit the international community to a common vision of development˜one in which human development and poverty reduction have the highest priority. The objective of the MDGs is to serve as guideposts and focus the efforts of the world community on achieving significant, measurable improvements in poor people‚s lives. The goals grew out of the agreements and resolutions of various development conferences organized by the UN in the 1990s.
The poor have physical assets—food, clothing, housing—and financial assets, such as income or savings, with which to acquire basic necessities. Access to financial
services enables the poor to increase income and smooth consumption flows, and thus expand their asset base and reduce their vulnerability. Empirical evidence shows that, among the poor, those participating in microfinance programs who had access to financial services were able to improve their well-being˜both at the individual and household level˜much more than those who did not have access to financial services.
- In
Bangladesh, Bangladesh Rural Advancement Committee (BRAC) clients increased household expenditures by 28% and assets by 112%. The incomes of Grameen members were 43% higher than incomes in non-program villages.
- In El
Salvador, the weekly income of FINCA clients increased on average by 145%.
- In
India, half of SHARE clients graduated out of poverty.
- In
Ghana, 80% of clients of Freedom from Hunger had secondary income sources, compared to 50% for non-clients.
- In
Lombok, Indonesia, the average income of Bank Rakyat Indonesia (BRI) borrowers increased by 112%, and 90% of households graduated out of poverty.
- In
Vietnam, Save the Children clients reduced food deficits from three months to one month.
Increased earning and savings provide poor people with some cushion from the day-to-day struggle of earning a living. This opens up the possibility of investing in their children‚s future, and in education in particular. Empirical evidence indicates that, in poor households with access to financial services, children are not only sent to school in larger numbers, but they also stay in school longer. Even where children help out in family enterprises, the poverty-induced imperative of child labor decreases, and school drop-out rates are much lower in client households than in non-client households. Studies on the impact of microfinance on children‚s schooling show that:
- In
Bangladesh, almost all girls in Grameen client households had some schooling, compared to 60% of girls in non-client households. The schooling rate for boys was significantly higher˜81% of boys in client households received some schooling, compared to 54% in non-client households. Basic competency in reading, writing, and arithmetic among children 11ˆ14 years old in BRAC member households increased from 12% in 1992 to 24% in 1995, compared to only 14% for children in non-member households.
- In
Honduras, Save the Children clients increased earnings, which enabled them to send children to school and to lower dropout rates.
- In
Peru, Acción Communitaria del Peru-borrower households spent 20% more on schooling for their children than non-borrower households.
Overall, the experience of microfinance programs points to strong evidence that the access to financial services and the resultant transfer of financial resources to poor women, over time, lead to women becoming more confident, more assertive, and better able to confront systemic gender inequities. Access to finance enables poor women to become economic agents of change by increasing their income and productivity, access to markets and information, and decision-making power. Existing studies show that this empowerment is very real and can take different forms:
- In
Indonesia, female clients of BRI were more likely than non-clients to make joint decisions with their husbands concerning allocation of household money, children‚s education, use of contraceptives, family size, and participation in community events.
- In
Bangladesh, a survey of 1,300 clients and non-clients showed that credit clients were significantly more empowered than non-clients in terms of their physical mobility, ownership and control of productive assets (including land), involvement in decision making, and awareness of legal and political issues.
- In
Nepal, 68% of Women‚s Empowerment Program members said that they made decisions on buying and selling property, sending daughters to school, arranging children's marriages, and family planning.
- In
India, SEWA clients have lobbied for higher wages, the rights of women in the informal sector, and resolution of neighborhood issues.
However, it would be wrong to assume access to financial services automatically has a positive impact on women‚s welfare. In some instances, women‚s access to microfinance may result in increased violence within the household, leaving them with a greater loss of power. Women borrowing for a microenterprise may end up being forced to work longer hours and lose control over financial resources and decision making to male members of the family. Neither should microfinance be seen as a substitute for dealing with key structural issues pertinent to women and poverty, such as lack of skills and education, or legislation that discriminates against women (e.g., property rights, agrarian or land reform, trade agreements).
Other than hunger, illness is generally the most important risk that poor people periodically face. Deaths due to illness, time taken off from work because of an illness, and health care-related expenses erode incomes and savings, often force the poor to sell assets and go into debt. Increased earnings and savings allow clients to seek out and pay for health care services when needed, rather than wait for conditions to deteriorate. In addition, many microfinance institutions actively promote health education. This may take the form of a few simple, preventive health care messages on immunization, safe drinking water, and pre-natal and post-natal care. Some programs provide credit products for water and sanitation that directly improve clients‚ living conditions. A few programs have also taken initiatives to promote health insurance for their clients.
- In Uganda, 32% of clients of the FOCCAS microfinance program had tried an AIDS prevention practice, twice the percentage for non-clients.
- In
Bangladesh, a study of BRAC clients found that fewer members suffered from severe malnutrition than non-clients and that the extent of severe malnutrition declined the longer clients stayed with BRAC.
- In
Bangladesh, Grameen clients showed a higher rate of contraceptive use (59%) than non-clients (43%). This is attributed to clients‚ increased awareness of contraceptive programs (gained from attending group meetings) and from increased
mobility, which allowed women to seek out such services.
- In
Bolivia, a study found CRECER clients had better breast-feeding practices, responded more with rehydration therapy for children with diarrhea, and had higher rates of DPT3 immunization for children.
- In
Ghana, Freedom from Hunger clients also demonstrated better breast-feeding practices, and their one-year-old children were healthier in terms of weight-for-age and height-for-age, compared to children of non-clients.
- In
Uganda, 95% of clients of the FOCCAS microfinance program had engaged in some practices for improved health and nutrition of their children compared to 72% of non-clients.
There has been very little study of the extent of the impact of financial services for the poor on safe drinking water, sanitation, or other forms of environmental sustainability. However, there is evidence that with increased earnings the poor do invest in improved housing, water, and sanitation. Many microfinance programs provide specific loans for tube wells and for toilets. Other programs, such
as SEWA in India, have creatively linked microfinance to slum improvement projects. Such projects help build community infrastructure (tap water, toilets, drainage, and paved roads) that are paid for by community residents through loans from microfinance institutions.
The last goal provides the means to achieve the other goals. Access to financial services enables the poor to fight the various dimensions of poverty and make improvements to their lives. Whether they save or borrow, evidence shows that when poor people have access to financial services, they choose to invest their loans, additional earnings, or savings in a wide range of activities and assets that benefit not only themselves but also their households. Thus access to financial services provides the poor with the means to make improvements in their lives—in other words, to achieve most of the MDGs—on their own terms, in a sustainable way.
Access to credit, savings, or other financial services is only one of a series of strategies needed to reduce poverty and achieve the MDGs. Financial services need to be complemented by access to education, health care, housing, transportation, markets, and information.
Susy Cheston and Lisa Kuhn, Empowering Women through Microfinance (New
York: UNIFEM, 2002).
Sam Daley-Harris, ed., Pathways
out of Poverty: Innovations in Microfinance for the Poorest Families (Bloomfield, Conn.: Kumarian Press, Inc., 2002).
Naila Kabeer, "Money Can‚t Buy
Me Love": Re-evaluating Gender, Credit, and Empowerment in Rural Bangladesh, IDS Discussion Paper No. 363 (Brighton, U.K.: Institute of Development Studies, University of Sussex, 1998).
Shahidur
Khandker, Micro-Finance and Poverty: Evidence Using Panel Data from Bangladesh (Washington, D.C.: World Bank, Rural Development Research Group, January 2003).
Elizabeth
Littlefield, Jonathan Morduch, and Syed Hashemi, CGAP Focus Note No. 24: Is Microfinance an Effective Strategy to Reach the Millennium Development Goals? (Washington, D.C.: CGAP,
January 2003).
L. Mayoux, "Questioning Virtuous Spirals: Micro-finance and Women's
Empowerment in Africa," Journal of International Development 11, no. 7 (1999): 957-84.
Jonathan Morduch and Barbara Haley, "Analysis of the Effects of Microfinance on Poverty Reduction" (paper prepared by RESULTS Canada for the Canadian International Development Agency, November 2001).
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