Promoting gender-sensitive entrepreneurship via microfinance institutions
by Una Murray
This paper was presented at FAO Headquarters on 8 March 2005 for the events of International Women’s Day
Microfinance is promoted as a mechanism for triggering or sustaining social and economic development by supporting entrepreneurial activities. Microfinance can have multiple spin-off benefits, including the potential to be a component of poverty reduction strategies, thus contributing to the Millennium Development Goals (MDGs). Whilst clients who use microfinance services differ according to age, income, ethnicity and whether they access microfinance services as individuals or in groups, typical microfinance clientele in many parts of the world have been resource poor female entrepreneurs.
Microfinance programmes contribute to the MDG 1 by giving low-income rural women and men a chance to develop both their on and off-farm income generating activities. An increase in women’s income has been shown to have positive effects for children’s nutrition, education and well-being, which also supports other MDGs. Although responding to major development challenges cannot be based solely on simply improving access to financial services, microfinance is an effective tool if used in conjunction with other development approaches and policies.
Indeed, microfinance institutions themselves are quite diverse ranging from large commercial banks to smaller NGOs. Microfinance institutions also differ greatly in terms of their methodologies; client base and numbers; range of financial products; average loan size; terms of loans; repayment incentives; savings requirements; interest rates and fees; collateral requirement; reliance on donors or other external funding; governance and management; communication capabilities and the non-financial products and training they offer.
Expanding microfinance programmes often begin with consultations with community officials and villagers in order to brief them on the microfinance institution and its policies. In other cases, microfinance services evolve from NGOs existing in the community who begin to offer more professional financial services. When the latter is the case, the NGO often legally separates any types of welfare service provision from its microfinance work. Other microfinance programmes grow from groups already established in the community such as informal savings groups, guarantee groups or cooperatives. These groups evolve when there are individuals with relevant financial skills and experience in formalizing and organizing such groups. The end result should ideally be democratic membership-based organizations that provide financial services to its members.
Knowledge about gender issues amongst those involved in providing microfinance services will vary depending on the type of microfinance institution. While the staff of many NGOs involved in microfinance may have a comparative advantage regarding knowledge of gender issues, the lack of business skills among staff within the NGO sector may also limit their ability to sustainably deliver microfinance services to poorer clients. The heterogeneity of microfinance institutions (and microfinance clients) poses challenges for the delivery of microfinance in a manner that is gender equitable. In this context, gender sensitivity can be considered both in terms of:
Gender refers to the social, economic and cultural roles and relations between women and men; taking into account the different responsibilities of women and men in a given culture or location and in different population groups (children, aged people, ethnic groups etc.).
Gender mainstreaming is a process by which a microfinance institution considers gender equality issues in all its activities, programmes and policies. So rather than having the focus only on women, the relative conditions of men and women in access to financial services and improving their entrepreneurial activities, are examined in order to highlight differences. Once such differences are identified, something can be done about these inequalities, or links to other organisations that can help redress inequalities can be made.
The main focus in this paper is on how staff from a microfinance institution can interact with potential clients in a more gender-sensitive manner.
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