This paper looked at the role of microfinance in bringing about the empowerment of women in Sierra Leone. The paper draws its focus from a 2010 research paper on the same topic commissioned by KfW Entwicklungsbank of Germany (Roxin et al, 2010). While economic empowerment has been touted as the panacea for poverty and gender imbalance in Third World countries, the paper looks at the veracity and accuracy of this claim, especially in the socio-economic aspect. It finds that microfinance does have a direct impact on the economic empowerment of women but as far as social and political empowerment are concerned, it has no effect. However, microfinance has improved the quality of life in Sierra Leone by giving women a chance to have economic autonomy.
Microfinance has been around for two decades now with varied results. While it has been widely acclaimed as the most effective tool for development and poverty eradication in the Third World, some critics have been up in arms against what they term as ‘disillusionment’ about the role microfinance plays in poverty reduction and empowerment (Schicks, 2010; Schmidt, 2010). Nevertheless, the naysayers have not prevented the ‘bushfire-like’ spread of microfinance from South Asia, South America and finally to Africa. Today, billions of dollars are being pumped into microfinance projects in war-ravaged and poverty-stricken countries like Sierra Leone.
It took some time before microfinance took root in Sierra Leone but it is presently one of the most popular poverty-reduction attempts in the country. Most of the micro-finance institutions have focused on women due to the perception that economic empowerment of women transforms the social economy. In addition, women are often seen as more vulnerable and in need of empowerment sustainably and in the long term than their male counterparts.
Previously, the role of women in economic participation was overlooked even by international organizations such as the World Bank and it is only in the late 90s that they were considered a target group for development purposes (Isserles, 2003). This caused a wide gap between men and women in terms of access to credit, employment, entrepreneurship, inheritance and ownership of property (Mayoux, 1998). Kerry (2010) states that the wide gender gap is unjust and inefficient when it comes to development in the Third World. To address the gap, development activities are presently focused on women empowerment not only economically, but in all spheres. The Millennium Development Goals (MDGs) state that “a widespread recognition that empowering women, in particular, is key to economic and social development (ToRs, 2010, p.1).”
Sierra Leone is a war-ravaged African country with one of the lowest Human Development Index (HDI) rankings of 158 out of a possible 169 (UNDP, 2009). This means that human conditions in the country are deplorable due to the poor access to the basic necessities of life. Consequently, the country has 70% of its population living below the poverty threshold (UNDP, 2007) which has caused low access to other socioeconomic needs such as health and education.
In such situations of squalor, women are usually hard-hit and very vulnerable to social ills such as sexual exploitation, domestic violence and neglect. This is evident in statistics, with adult literacy in Sierra Leone as an example, where we find that the literacy rate of women stands at 54% of that of men (UNDP, 2009). Such a statistic has numerous ramifications starting with the fact that it is an impediment to women’s access to formal employment and political participation (FRIDE, 2009). The under-representation of women in politics has led to the formulation of laws whether statutory, religious or customary that are designed to keep women voiceless ad powerless (SLANGO, 2007). Such laws have also inhibited the access of women to property and also their say on issues concerning their own lives such as health, reproductive rights and marriage.
As a consequence of the foregoing, women in Sierra Leone have faced insurmountable problems especially relating to health. Statistics show that 94% of women have undergone Female Genital Mutilation (FGM) which is an alarming statistic even for an African country (UNDAF, 2007; WHO, 2010). Other health ramifications include poor sexual and reproductive health and one of the highest maternal mortality rates in the world at 1,800 deaths for every 100,000 live births (UNDAF, 2007; UNICEF, 2009).
The above challenges facing women empowerment in Sierra Leone have led to an increasing international concern with NGOs looking to introduce several microfinance projects in a bid to raise the economic and social capacity of women. Perhaps the biggest and most important microfinance institution in Sierra Leone is MITAF, a multi-donor financial facility founded in 2004 by the United Nations Capital Development Fund (UNCDF), KfW (a German development bank), United Nations Development Program (UNDP) and the Bank of Sierra Leone (BoSL) in collaboration with the country’s Ministry of Finance and Economic Development (MoFED).
MITAF introduced a program in 2010 dubbed MITAFII that is primarily a microfinance facility for women. Through this program, women have been able to access credit for start-up and maintenance of their businesses. The program has helped in providing data for researchers seeking to study the effects of microfinance on women’s empowerment. MITAF has also been evaluated based on its ability to meet the specific needs that women in both rural and urban areas have (Duval & Bendu, 2009). In this study, we shall analyze the effects of microfinance in Sierra Leone based on the various programs in existence such as MITAF. The paper shall also consider the impact of microfinance in the empowerment of women within the socioeconomic sphere.
Based on the large number of microfinance institutions in Sierra Leone looking to provide credit facilities to women, this research paper shall seek to answer the question; does microfinance bring about the socio-economic empowerment of women?
Microfinance is definitely an important tool in the fight against poverty. This is because poor people are not able to raise themselves out of the yoke of poverty due to lack of money to start-up businesses or to expand their small-scale businesses to larger corporations that can create sufficient wealth. Since the vast majority of the beneficiaries of microcredit are women, there is a direct link between microfinance and the economic empowerment of women. The social, economic and political dimensions in a sample are always related, therefore, an improvement in the economic dimension could cause a shift in the other dimensions. Microfinance can thus cause empowerment of women in the socio-economic aspect.
Secondary data was mainly used in the drafting of this research report. Much of the data was obtained from other research reports on microfinance and women empowerment in Sierra Leone, Honduras and Bangladesh. The research covered a large sample of data mainly from the three major cities in Sierra Leone; Freetown, Bo, and Kenema. Additionally, the data on micro-finance institutions (MFIs) in Sierra Leone was inclusive of the two types of MFIs; Profit-based and NGO-led MFIs.
It is interesting to note that most literature on women empowerment attempts to capture the three dimensions to it: social, political, and economic. The first dimension of social empowerment involves the acceptance and participation of women in making decisions in society and in contributing to social growth. The economic aspect of empowerment occurs where the woman has access to income, employment, market for her goods, and property ownership (Kent, 2007; Kapitsa, 2008). This kind of empowerment enables the woman to participate in the social economy. Lastly, there is the political dimension where the woman is allowed to make independent political decisions, vote and vie for political positions. It thus encompasses the three aspects of participation, decision-making and representation (Eyben et al, 2008; Wichterich & Rodenberg, 1999).
Microfinance, unlike empowerment, is less controversial and most of the literature on it is somewhat harmonious. The concept of microfinance was introduced to the world by the now-famous Bangladeshi economist Mohammed Yunus as a solution to poverty in his country. Yunus felt that principle of modern economics propagated poverty by expecting the benefits of capitalism to ‘trickle down to the poor, something that rarely happens. He decided that the solution to poverty was to provide easy access to credit to poor but financially active or motivated entrepreneurs.
The idea of microfinance quickly spread throughout Asia and Latin America until it eventually found its way into Africa in the early 1990s (Weiss & Montgomery, 2005). Since then, several microfinance organizations have come up even in First World countries where economists had first opposed the idea as being ‘too socialistic’ and ‘disruptive of the delicate economic balance.’ It is now a global phenomenon that has been applied to provide lasting solutions to poverty rather than applying ‘band-aid’ remedies such as giving relief food and hand-outs. According to the World Bank, there are now over 17,000 MFIs across the globe offering micro-loans to over sixteen million people (IMF, 2005).
The question has now shifted from the relevance of microfinance itself to the best way to administer it to yield the best solutions. As Mohammed Yunus himself advocates, the best administration method is through emphasis on group solidarity and support (Yunus & Jolis, 2007). This places power and responsibility in the hands of the group members who motivate each other through competition and support. Group pressure leads to individuals paying up their loans on time and where they feel that they cannot, they can always receive support from fellow group members.
According to Malcolm Harper (2007), “group membership provides individuals with an easier and more organized way to begin saving their money. It also gives many women the opportunity to leave the home and participate in a social collective for the first time, allowing them new confidence and agency, while taking responsibility and extra work out of the hands of the organization.” This system has proven to be very effective mainly in rural areas and it explains why most organizations still rely on the group-loaning system of microfinance (Harper, 2007).
Critics of the group-loaning system insist that provision of individual credit facilities empowers the individual more due to the freedom of time, money and responsibility (Hulme, 2007). Harper (2007) criticizes group loans on the ground that they are inflexible, too low in terms of value and too long in terms of repayment period. This is in addition to the burden of attending regular meetings which is an inconvenience for women who are expected to run their businesses, pay back their loans and still take care of their families. Most of these women are often forced to either close their businesses thus losing crucial business or shirk some of their family duties which is not positive for their social empowerment. In addition, group membership comes with the extra responsibilities of looking out for the ‘weaker’ members while also guaranteeing bigger loans for strong members.
Based on these weaknesses of the group setting, some MFIs are now giving individual loans. This gives the client the flexibility to decide the amount of loan they need and to negotiate repayment terms. They also have the benefit of allowing the individual to focus on her own business without extra responsibilities. More and more MFIs are considering this model for the ‘moderately poor’ client who is able to use profits from the business to pay back the loan and still get sufficient income for her family.
Back to the literature on empowerment, we find that researchers argue for socio-economic empowerment. However, this is hard to achieve in Sierra Leone because the country is just recovering from years of civil strife (Government of Sierra Leone, 2000; PRSP II, 2008). The trauma of the war has led to the tendency to embrace traditional customs and values that are mainly discriminative against women (Schafer, 1995; Maru, 2005). It remains to be seen, what role microfinance shall play in the whole recovery dynamic especially in the socio-economic empowerment of women.
Much of this study is drawn from the research by Roxin et al (2010) on the role of microfinance in the empowerment of women in Sierra Leone. The researchers discuss empowerment on four fronts; the material pathway, cognitive pathway, perceptual pathway and finally, the relational pathway. The material pathway refers to the direct financial benefits that accrue to the woman as a result of microfinance. The cognitive is mainly concerned with the skills and knowledge acquired through the use of microcredit. Thirdly, the perceptual pathway looks at the changes in women’s perceptions that occur after the economic empowerment of microfinance. Lastly, relational pathway deals with the social changes that come with microfinance.
Focus on these four pathways reveals that the impact of microcredit is usually dependent on the particular area being examined. This is because research has shown that while microcredit helps to expand businesses and income, it has little social impact on collective action (Roxin et al, 2010). The strongest positive impact of microfinance is therefore evident in the material pathway. This is because microcredit directly boosts small businesses while giving women the capital to venture into new business ventures. Microcredit is also able to produce significant positive change in short-term poverty reduction measures.
Still on the material pathway, it is evident that microcredit brings about stabilizing of clients’ livelihoods since they are able to focus more on strategic investments that yield more income to satisfy a broader range of needs. On the other hand, certain dynamics such as over-indebtedness are negatively affected by microcredit whereby the individual regresses further into poverty (Dichter, 2007). However, the overall impact of microcredit is good on the issue of material gain.
On the cognitive level, the impact of microfinance begins to diminish. Though most MFI programs provide training for clients, there is little evidence to show an improvement in the level of skill and knowledge in women (Roxin et al, 2010). Further evidence of this is found in the lack of increased agency, limited understanding of loan procedures and poor utilization of new opportunities.
While the cognitive and material factors can be assessed independently, the next two pathways, perceptual and relational are quite intertwined. Both are triggered by material changes e.g. an increase in the woman’s income will impact her contribution to her family’s well-being (relational) and also her self-perception (perceptual). While material changes cause increased contributions to the family in 67% of the cases, this increase in contribution does not seem to translate into an increase in the woman’s decision-making power in the family setting (Roxin et al, 2010). Since the woman cannot make in-roads in her own family structure, it becomes harder for social empowerment to take place.
When it comes to perception, increases in household contributions seem to increase women’s self-confidence and esteem in over 90% of the cases. Again, this is a positive effect that can be attributed to microcredit. However, better perception of themselves does not seem to trigger any kind of affirmative action for their rights and interests. Additionally, the same pattern is extended to future plans where women seemed confident about the future due to microcredit, but lacked ambition (Roxin et al, 2010).
Generally, microcredit seems to impact positively on women by enabling them gain more respect in their homes, marketplace and within the wider community but the respect gained is not used by the women to fight for better treatment and more rights (Kabeer, 2001; Johnson, 2009). This can be attributed to the fact that microcredit groups usually meet for the sole purpose of discussing financial issues and are not as Roxin et al (2010) state “breeding ground for common interests and shared concerns leading to collective social action for empowerment (p. 81)”.
In summary, microcredit seems to have a direct and observable impact on the material pathway. For the other three, the relationship between microcredit and cognitive, perceptual and relational effects remains complex. While there seems to be scattered positive effects across the three, there is no conclusive evidence that that microcredit can impact social empowerment. Even where women have opportunity to form collective social action, there is lack of self-drive to improve other non-financial spheres of empowerment. This means that microfinance has a very limited capacity to cause social let alone political empowerment in Sierra Leone (Roxin et al, 2010).
Microfinance seems to have the greatest impact on women’s empowerment in economic terms. Better access to credit translates into increases in income, expenditure and business expansion. Since economic empowerment at a basic level cannot be independent of other dimensions, there is a high likelihood for the improvement of these other dynamics. However, the challenge is to transform economic empowerment in its raw form to other dimensions in the social and political spheres. Nevertheless, microcredit seems to trigger the initial stages for social and political transformation by increasing self-confidence and esteem and the level of respect for economically empowered women in the society.
Despite these initial changes, there is a need for a ‘catalyst’ to transform these gains into a cause for better treatment of women in society. Additionally, there is a need for external intervention from the government or NGOs to improve the cognitive abilities of women so that they can learn how to utilize new opportunities and understand business practices (Mahmud, 2003). Since these ‘catalysts’ are not in place, the process of translating economic empowerment into social empowerment is still slow and weak in Sierra Leone.
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