The Magic Ingredient?
Microfinance & Women's Empowerment

by Linda Mayoux1

A Briefing Paper prepared for the Micro Credit Summit, Washington, February 1997

Microfinance programmes are currently being promoted as a key strategy for simultaneously addressing both poverty alleviation and women's empowerment. Where financial service provision leads to the setting up or expansion of micro-enterprises there are a range of potential impacts including:

  • increasing women's income levels and control over income leading to greater levels of economic independence
  • access to networks and markets giving wider experience of the world outside the home, access to information and possibilities for development of other social and political roles
  • enhancing perceptions of women's contribution to household income and family welfare, increasing women's participation in household decisions about expenditure and other issues and leading to greater expenditure on women's welfare
  • more general improvements in attitudes to women's role in the household and community

Microfinance programmes targeting women have been a welcome corrective to previous neglect of women's productive role. For some women in some contexts microfinance programmes have indeed set in motion a process of empowerment where all the above elements have been mutually reinforcing. There are many anecdotal case studies in NGO reports of women who have shown considerable initiative, increasing their income and improving their status in the family and community, particularly after a series of loans.


There has however been no systematic, cross-cultural comparative study of the ways in which microfinance programmes contribute to women's empowerment or the contexts and organizational frameworks within which this occurs. Material collated in a pilot research project co-ordinated by the author indicates that automatic benefits to women cannot be assumed even in the most innovative programmes.2 Many evaluations of microfinance programmes have assumed that high take-up and repayment levels indicate positive impact on women and have not investigated further. Some have anecdotal information from participatory consultations and gender workshops. Existing detailed studies of empowerment, mainly in Bangladesh, have used different definitions of empowerment and different methods of investigation and reached rather different conclusions, even about the same organisations3. Nevertheless, despite the patchy nature of information, and debates about the impact of particular organizations, it is clear that:

  • Many programmes have had negative as well as positive impacts on women. Where women have set up enterprises this has often led to small increases in access to income at the cost of heavier work loads and repayment pressures. In many cases the loans have been used by men to set up enterprises over which women have little control. In some cases they have been employed as unpaid family workers with little benefit. In others there have been indirect benefits and improvements in various aspects of women's well-being as a result of greater recognition of their role in the household and community. In some cases women's increased autonomy has been temporary and led to withdrawal of male support (see Box 1). In some programmes there are increasing fears that women's small increases in income are leading to a decrease in male contribution to certain types of household expenditure.

  • Within schemes, impacts often vary significantly between women. There are differences between women in different productive activities and between women from different backgrounds. In some contexts schemes mainly benefit women who are already better off. In others poorer women are freer and more motivated to use credit for production. In most cases the poorest women are by-passed in both individual and group-lending programmes or are least able to benefit because of their initial low resource base, lack of skills and market contacts. There are also individual differences between women from similar background and within the same industries.

  • Positive impact on non-participants cannot be assumed, even where women participants are able to benefit. Women micro-entrepreneurs are frequently in competition with each other and the poorest micro-entrepreneurs may be disadvantaged if programmes do not include them. Where women employ labourers it cannot be assumed that they give better wages and conditions of work than men (Mayoux 1995a). Benefits for women's families cannot be assumed. Women may employ daughters and daughters-in-law as unpaid family labourers increasing their workload. Although increased family income channelled through women often benefits children considerably, anecdotal evidence suggests they may often still prioritise the interests of boy children. Negative impacts are even more likely where women do not control the loans.

The case of Edith Kagino in Uganda

Edith Kagino is married, with seven children, and she lives in a house on a small piece of land. Before she married, she used to help her mother to keep the cattle in Luwero, where she developed an interest in dairy. After marriage she worked in the workshop of her husband. She is an honest and hard working woman.

In 1991 she opened a savings account with the Uganda Women Finance and Credit Trust and she has been a regular saver. She acquired a loan in 1992, for two in-calf heifers and for the construction of a small cow shed. She planted napier grass to feed the cows. Edith started off very well, with the first cow calving normally. Problems started when her husband instructed her to go back to the workshop. She could no longer take care of the cows, and eventually she lost one of them. She had discussions with her husband on this, but he insisted that she should remain in the workshop. Edith was eventually chased away from her home by her husband. She had to find shelter for herself and her seven children. The husband claimed the cows as his so she was not allowed to take them.

After some months, with the help of in-laws, the husband called her back. But he had already sold the roofing sheets and construction materials of the cowshed and all grass was gone. She got pregnant again, and now the husband has decided to live with another wife. Edith's project is in a shambles. At the moment she is recovering from the shock, trying to start again. Edith's projects is marked as a doubtful debt.

Source: Adapted from Uganda Women Finance and Credit Trust: Evaluation Report 1991-1993, p20.

Moreover, increased funding has been accompanied by pressures from donors to adopt a financial systems approach which prioritises cost efficiency and financial sustainability. These emphases have been a reaction to inefficiency, low repayments and lack of impact of many previous microfinance programmes. This approach takes demand for credit and repayment levels as indicators of success, requires microfinance programmes to be ultimately self-sustaining and preferably making a profit. These emphases favour large organisations in order to benefit from economies of scale and group lending where groups take much of the responsibility for savings and loan repayment (Otero and Rhyne 1994).

Targeting women is being increasingly advocated because of evidence of their higher repayment rates. However, evidence suggests that the prioritisation of cost efficiency and financial sustainability may further dilute the potential contribution of microfinance programmes to women's empowerment. This is particularly the case where there is an implicit (and in some cases explicit) prioritisation of donor interests.

  • Impact on empowerment cannot be inferred from take-up of financial services or repayment levels. Women may repay through taking loans elsewhere and getting into serious debt. As noted above, loans may be controlled by men. Some researchers have expressed concerns that women's microfinance programmes may be merely using women as unpaid debt collectors mediating between development agencies and male family members, increasing their dependency on men and/or conflicts between women to fulfil repayment targets (eg Goetz and Sen Gupta 1996; Noponen 1990).
  • The overriding concern with repayment rates puts further pressures on groups to exclude those likely to experience greatest problems ie the poorest (Hulme and Mosley 1996; Montgomery 1996; Noponen 1990)
  • In some cases increased funding for large organisations has led to the squeezing out of smaller organisations in the same area who may have been challenging gender subordination on a wider basis (Arn and Lily 1992; Ebdon 1994). The degree to which this is a result of women's own decision to switch allegiance because of better credit terms, or because of pressure from men to get access to credit while maintaining their own power, is unclear.
  • In some cases adoption of this approach has led to cutbacks in support services. There are dangers that the concern with short-term cost-efficiency may jeopardise long term organizational and client sustainability. Long-term sustainability requires both attention to developing the skills, earning capacity and empowerment of clients and institutional learning which may entail substantial costs in the short term (Johnson and Rogaly 1996).


In view of these potential disbenefits to women, there is an urgent need for evaluation of the impact of programmes on women's empowerment. We know very little about the relative numbers of women within most programmes who benefit or fail to benefit, who these women are, or the contextual and organisational factors influencing this. Importantly for most women in most programmes it is likely that the contribution of microfinance services to empowerment could be enhanced through a combination of changes in the way services are delivered; more effective support services; or linkage with services provided by other agencies including organisations challenging gender subordination directly.

Impact evaluations are likely to be more reliable and have clearer relevance for policy if they are clearly linked to the development of a more comprehensive framework for participatory planning. Women's needs in relation to microfinance are diverse, context-specific and change over time (Johnson and Rogaly 1996). Evidence also indicates differences between women within programmes and between women and development agencies about the aims of microfinance programmes. (Mayoux 1997a,c). The only way in which such flexibility and diversity can be adequately addressed to ensure benefit to women is through a participatory planning process.

The need for such a process is signalled both within the financial systems approach itself (eg the insistence on market relevance and group lending) and empowerment approaches where the need for grassroots participation is assumed. However, experience suggests the need to address some of the shortcomings of existing systems of participation. Participation takes time, skills and resources which are often in scarce supply, particularly for very poor women, and 'participation' per se is not necessarily empowering (Mayoux 1995b). In relation to microfinance programmes, evidence suggests that women often prefer individual rather than group loans and that in many contexts group formation has been problematic. As discussed above, savings and credit groups often discriminate against very poor and disadvantaged women. Groups do not necessarily go on to question or address wider issues of gender subordination limiting women's ability to increase and control incomes or achieve their other aspirations.

There has been no comparative study of the ways in which different types and levels of participation in microfinance programmes affect women's empowerment. Any proposals at this stage therefore can only be tentative. It is likely that a framework for participation would consist of a number of possible elements as outlined in Box 2. Establishing an ongoing system of participatory consultation would be an important step towards client sustainability through making information on linkages between microfinance and empowerment, ways of increasing income and control over income and other strategies directly available to the women concerned.The findings of participatory research would also be a useful tool in lobbying for necessary changes in the formal financial sector.4

Such an approach would differ from the financial systems approach in taking a multi-dimensional view of empowerment and prioritising the needs of poor women participants and disadvantaged non-participants over those of donors. At the same time it would have to balance and negotiate where possible the demands of donors and women clients within constraints of available donor resources and the need for long term sustainability. Importantly it would need to clarify macro-level constraints to women's empowerment, the limitations to microfinance programmes and ways of linking with other institutions to address these.

Some elements of a participatory planning framework

An ongoing system of participatory consultation involving the different stakeholders with influence over decision making. This would:

  • establish the aims of the organisation (eg definition of empowerment)
  • establish and agree the range of decisions over which the respective parties should have influence or control (eg whether or not details of credit delivery are negotiable and by what criteria)
  • establish ways in which credit and savings delivery can be market relevant and reconcile the various demands and capacities of the different parties (eg ways in which women's own strategies for empowerment can be supported, other types of support services needed)
  • establish possible strategies for enhancing contribution to empowerment which do not unnecessarily increase women's vulnerability
  • establish ways in which the interests of other disadvantaged groups can be protected
  • elucidate the potential conflicts of interest between the various parties and the potential limitations of microfinance programmes to resolve these
An institutional framework for participation including:
  • grassroots groups for savings and credit (SCGs) of varying composition and structure depending on the needs of the women concerned
  • a federation of grassroots groups with wider policy making powers
  • mechanisms for clarifying donor/NGO needs and constraints and negotiating between these and the demands of grassroots groups
  • mechanisms for linking with other institutions to address wider constraints to women's empowerment
  • mechanisms for protecting the interests of disadvantaged non-participants


Recognising the need to explore the issues raised above in depth, a group of UK based International NGOs have initiated a research project entitled "Microfinance and Women's Empowerment: Strategies for Increasing Impact". The pilot phase of research is collating existing published and internal NGO material, and holding 3 regional workshops in South Asia, West Africa and East Africa. A longer research programme is planned which will:

  • undertake detailed research of the impact of selected programmes on women's empowerment, the mechanisms through which this occurs and the constraints
  • develop and pilot frameworks and methodologies for analysing the inter-relationships between empowerment, participation and sustainability
  • propose innovative structures for participatory planning to increase impact whilst maintaining (if possible) financial sustainability
  • clarify the limitations of microfinance programmes as a tool for women's empowerment and the types of support services necessary to maximize the contribution of microfinance services.
We are interested to receive copies of any evaluations of microfinance programmes which address issues of women's empowerment, for our resources library. We would also like to hear from anyone interested in being part of our network or involved in the proposed research. For further information and copies of papers, contact:

Linda Mayoux, 61 Cheney Way, Cambridge, CB4 1UE, UK Tel: +44 1223 501030 Fax: +44 1223 561322 e-mail: Susan Johnson, Economic Policy Analyst ACTIONAID, Hamlyn House, Macdonald Road, London N19 5PG, UK Tel: +44 171 281 4101 Fax: +44 171 263 7599 e-mail:


1 Linda Mayoux is the Principal Researcher for a pilot research project entitled "Microfinance and Women's Empowerment: Strategies for Increasing Impact" which has been initiated by a Steering Group of UK based International NGOs including ACTIONAID, ACORD, CAFOD, Care, ChristianAid, Opportunity Trust, Oxfam (UK and Ireland), Intermediate Technology Development Group and Womankind. The project is funded by the UK Overseas Development Administration.

2 This material is discussed in more detail with references in Mayoux 1997 a, b forthcoming

3 For example, compare the accounts of BRAC and Grameen Bank as given by Goetz and Sen Gupta (1996) and Hashemi et al (1996). For an overview of some of the other literature see Mayoux (1995a)

4 For further discussion of the issues raised here see Mayoux 1997c forthcoming

References Arn, AL and Lily, FB (1992) "Evaluation Report of Saptagram Nari Swanirvar Parishad" Oxfam, Oxford.

Ebdon, R (1995) NGO Expansion and the Fight to Research the Poor: Gender implications of NGO Scaling-Up in Bangladesh, IDS Bulletin, Vol 26, No 3, July

Goetz, A.M. and R. Sen Gupta (1996) "Who Takes The Credit? Gender, Power and Control over Loan Use in Rural Credit Programmes in Bangladesh", World Development, Jan

Hashemi, S. M., Schuler, S. R. and Riley, A. P. (1996) "Rural Credit Programs and Women's Empowerment in Bangladesh." World Development Vol. 24 No.4

Hulme, D and Mosley, P (1996) Finance Against Poverty London: Routledge

Johnson, S. and B. Rogaly (1996) "Microfinance and Poverty Reduction" Oxford: Oxfam

Kabeer, N and Murthy, R.K. (1996) "Compensating for Institutional Exclusion? Lessons from Indian Government and Non-Government Credit Interventions for the Poor" IDS Discussion Paper No. 356

Mayoux, L.(1995a) "From Vicious to Virtuous Circles? Gender and Micro-Enterprise Development" UNRISD Occasional Paper No 3, Geneva, 1995

Mayoux, L (1995b) "Beyond naivety: Women, gender inequality and participatory development - some thorny issues" Development and Change, 26 (2)

Mayoux, L (1997a) "Microfinance Programmes and Women's Empowerment: Towards a Framework for Participatory Planning", Background Discussion Paper, ActionAid UK

Mayoux, L. (1997b forthcoming) "Microfinance Programmes and Women's Empowerment: Some issues from experiences in East Africa"

Mayoux, L. (1997c forthcoming) "Women's Empowerment and Participatory Development: Some issues from the experience of microfinance programmes in Asia"

Montgomery, R. (1996) "Disciplining or Protecting the Poor? Avoiding the Social Costs of Peer Pressure in Micro-Credit Schemes", Journal of International Development, Vol. 8 No. 2, Wiley, U.K.

Noponen, H.(1990) "Loans to the Working Poor: A Longitudinal Study of Credit, Gender and the Household Economy", PRIE Working Paper No 6, Rutgers University, New Brunswick, 1990.

Otero, M. and E. Rhyne (eds) (1994) "The New World of Microenterprise Finance: Building Healthy Financial Institutions for the Poor" IT Publications, London.

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