Microfinance - a Comparative Study

Analysis of the impact of microfinance on the livelihood of women in Kenya and other developing nations: A comparative Study.

Microfinance has been for many years now, one of the principal strategies for alleviating poverty across many developing countries. It has especially been a success in countries such as Bolivia, Bangladesh and Indonesia and has a growing momentum in Mexico, China and India. Becoming a strong pioneer of female credit financing in the early nineteen nineties, it has since been credited as being one of the biggest contributors to the growth of female entrepreneurship. Women 's roles in most developing countries were very limited to the domestic arena and it is the need to escape poverty provide the basic needs for their family and children that has driven most women into starting small businesses. Before microfinance, women had very little access to credit and it was only those who came from good economic standing that were able to take out a loan to finance their endeavors. (Stevenson and St-Onge 2005) This juxtaposition was as a result of basic economic theory that dictated the lack of financial wisdom behind lending to low income people who lacked enough collateral to secure their loans. (Armendariz de Arhion and Morduch 2005) Unfortunately for women in developing countries, it was and still is them who largely comprise the low income share; making them the least sought after by commercial financial institutions. It was the evidential success that came from the bold step taken by Muhammad Yunus, an economics professor at the time, of lending to a group of poor women in Bangladesh to pay off their debts that made credit lending to women a realm of the financial world.

The case for microfinance as a mechanism for poverty alleviation is simple. Mongomery and Weiss claim that it is argued that if access to credit can be improved, the poor can finance productive activities that will allow income growth providing that there are no other binding constraints. They also argue that on the other hand, it is also believed that microfinance for those who are close to being poor and face severe fluctuations in income that could bring them close to the poverty line, provides a source of emergency credit and an opportunity to foster saving as well. As we shall see, this was often the case for countries such as those in Latin America where the circumstances of micro finance are based on the shortfall of credit to many entrepreneurs from the collapse of commercial financial institutions. Although to some extent this is a much generalized surmise, the success of microfinance so far in its ability to be sustainable and foster high return rates among poor women cannot be denied. Its world-wide popularity as a tool to fight poverty and promote gender equality both now and in the future is explainable given the evidence collected in some countries of its positive impact on women's empowerment and incomes. In fact, many economists such as Armendariz de Agrhion and Morduch believe that the theory behind microfinance presents a series of many exciting possibilities for extending markets, reducing poverty, and fostering social change. Microfinance is also believed to have the potential to help improve long-term development since women are the main intermediaries of things such as children's health and education. (Blumberg 1999) Gender empowerment is also believed to accompany microfinance since as Corsi, Botti, Rondinella and Zacchia put it, it increases the scale and scope of self-empowerment opportunities, skill acquisition and protects women's rights by providing economic emancipation to women.

However, as we shall show in this paper through analysis of various case studies, the amount and extent of impact of micro credit on the incomes and livelihood of women that has been achieved so far is varied making some of these promising theories regarding the positive potential of microfinance, questionable.

Some of the impacts