Now that everyone’s seated,
why don’t we get started? For the past few weeks, we’ve been learning about,
uh, different aspects of international development. Today I want to touch
upon the financial side of development by talking about microfinance. I’ll
explain what exactly microfinance is, and then discuss how it affects gender
equality.
In the simplest of terms,
microfinance is the supply of basic financial services to the poor who don’t
have access to formal banking. These services can include loans, savings
accounts, microcredit, insurance, and pretty much anything else that a bank
would typically offer. Because the recipients of the services are extremely
poor, we’re talking about very, very small sums of money. A loan could be as
small as $25 dollars, for example. Thus, we refer to the initiative as
“microfinance” to distinguish it from the regular banking sector.
Clients of microfinance can
be either individual entrepreneurs or groups. The vast majority of
microfinance applicants are individuals who want to either start their own
businesses or expand their existing ventures. Maybe it’s a goat farmer who
needs to buy more goats, or a single mother who wishes to buy a sewing
machine to start an at-home tailoring business. But there are also small
groups of people who come together with an idea and apply for microfinance
services, usually microcredit, as a collective. The business ideas of these
groups tend to be more elaborate.
It’s important to remember
that there are informal methods of saving, lending, and investing already
taking place in these poor communities, but that they are neither safe nor
effective options. Let’s say that you
have invested all of your earnings into a goat. What do you do if there’s a
family emergency and you need a portion of the money from that goat back to
pay for a medical expense? You can’t just cut a leg off the goat and sell it,
now can you? Or consider the most traditional method of savings, which is
storing cash under a mattress. If the house burns down, the money goes with
it. Microfinance gives people better options for handling their money.
But how does microfinance
affect gender equality? Well, first of all, microfinance institutions are not
only inclusive of both men and women when it comes to their clients, but they
actually target women. They do this for a few reasons. One is that women, as
the child bearers, are more likely than men to ensure that the money they
generate is being used to care for their family. This has been proven by
numerous studies. Secondly, women are often not used for income generation in
poorer households, and having them participate economically increases the
wealth of the entire community.
Interestingly, and not
surprisingly, having access to microfinance services often improves women’s
status within their communities. As we know, money is a form of power. So
giving women the means to start businesses that generate wealth also affords
them the opportunity to becoming empowered members of society. They tend to
have more of a role in decision-making, both within their households and
within the greater community. What’s more, women who are successful with
their microfinance ventures have greater participation in the public and
political spheres, sometimes even going on to take leadership roles in
informal or formal governance structures.
Thus, economic empowerment
through microfinance has an enormous impact on gender equality, which is a
central goal of international development. Perhaps we should look at a few
cases of successful microfinance projects in order to illustrate how...
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