The Catholic University of Malawi

Research Proposal

BY

HEINRICH SITIMA

Supervisor:

DR. MANGULAMA

Topic: CHALLENGES FACING WOMEN IN ACCESSING CREDIT FROM

MICROFINANCE INSTITUTIONS A CASE STUDY OF CHIRADZULU

DISTRICT T/A MPAMA

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 CHAPTER 1

BACK GROUND OF THE STUDY

1.0 Introduction

Microfinance programs have proven to be important instruments to fight against female

poverty and vulnerability in developing countries. Among the 81.9 million poor clients
served by microfinance programs in 2005, 84.2 percent were women (World Bank 2005).
Microfinance, by targeting women, allows not only improvements in gender equality but also
ineffective decreases in poverty through the positive effect of gender equality on
development. Poor women in particular benefit from microfinance services. Women's status,
both in their homes and in their communities, is elevated when they are responsible for
managing loans and savings (Njeru and Njoka 1998). The ability to generate and control their
own income can further empower poor women. Most of these women have excellent
repayment records (Njeru and Njoka 1998), even though these women have shown that it is a
noble idea to lend to the poor, they have however numerous challenges and hardships in
accessing credit loans. This is especially true of women in Malawi Using microfinance
programs to give women access to financial services is a means of mobilizing their
productive capacities for the benefit of economic development. Through access to financial
resources, microfinance institutions not only gives women access to self-employment, but
also contributes to the amelioration of family life and influences the social situation of
women by promoting self-confidence and the capacity to play an active role in society.
Although Malawian women’s access to micro-finance credit has increased substantially in
the last few decades, their ability to access loans from such institutions is often constrained
by the disadvantages they face because of their gender. This study seeks to investigate and
document the challenges women face when they seek credit from microfinance institutions.

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1.2 problem statement

Microfinance institutions have proven to be effective in fighting poverty by providing

entrepreneurs with the necessary capital to start and expand their entrepreneurial activities.
Microfinance is also associated with a positive impact on social and human development
(Sebstad, et ah, 2013). For example, impact assessments have found positive changes in
microenterprise output, assets, employment and income. In additional to these effects on the
entrepreneurial activity of the poor, microfinance institutions are being attributed with
positive effects on issues such as household income, savings, children's education, health and
nutrition, and women's empowerment. Some credit facilities are structured in a way that does
not seem to favour poor women because they regard women as those that do not have
ownership over assets e.g land; these assets works as collateral when assessing microfinance
loans (Langyintuo 2020). These new set of rules credit coupled with sociocultural factors and
the current economic hardships are posing serious challenges to women seeking credit from
MFIs (microfinance institutions). This study therefore aimed at exploring the reasons why
women seek loans from MFIs and the main focus was on the challenges women face when
they go to borrow loans from MFIs.

1.3 Study Objectives

1.3.1 General objectives

The broad objective is to investigate challenges that women face in accessing credit or loans
from the microfinance institutions.

1.4 Specific Objectives

i. To investigate the factors that motivates women to seek microfinance credit

ii. To examine the challenges women face when they seek microfinance loans.

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1.5 Justification of the Study

In trying to justify why the current study is important, it is vital to mention that researchers have
found this area of study very important to the development of the socio-economic activities in
developing countries and their contributions to the development of small and medium size
businesses in Malawi. This research has therefore focused on major challenges faced by when
they go for microfinance loans. A study of this nature is equally very important because it is
going to enlighten the MFIs and NGOs doing microfinance on the difficulties women encounter
whenever they plan to access their loans. Microfinance as a whole provides the clients a means
to have access to financial services in their localities to boost their living standards in a
sustainable manner. The microfinance sector has undergone many changes in the past decade.
MFIs have effected many changes in their programs and activities. This is so because of
changing economic conditions and social behaviors. As a result, women are being subjected to
unfavorable borrowing conditions and unfavorable environments in accessing microfinance
loans from the microfinance institutions. This study aimed at establishing challenges faced by
women in the event of borrowing loans from these institutions. It will benefit; Academic
institution through this study, the researcher will add to the academic body of knowledge. This
includes the university and other institutions of higher learning, Government of Malawi which
through National Bureau of statistics would like to know the consequences of such challenges.
This is so as, being a contributor to empowerment in the country; this information will help give
more ideas on how to empower its women citizens. The study identified gaps in the topic for
further research works which would provide solutions towards dealing with these challenges.

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 CHAPTER TWO

LITERATURE REVIEW AND THEORETICAL FRAMEWORK

2.0 INTRODUCTION

Literature review lays a foundation for a study, relying mostly on primary and secondary
sources as it helps to orient the research and reader on what is known and not known about
an area of inquiry. This chapter will also provide the background to and justification for the
research undertaken as the researcher extracted and syntheses the main points issues and
findings from a critical review of the readings (Danson, 2015).

2.1 LITERATURE REVIEW

The concept of microfinance is not new. Savings and credit groups have operated for
centuries include the "susus" of Ghana, "chit funds" in India, "tandas" in Mexico, "arisan" in
Indonesia, "cheetu" in Sri Lanka, "tontines" in West Africa, and "pasanaku" in Bolivia, as
well as numerous savings clubs and burial societies found all over the world (World Bank
2001) . Formal credit and savings institutions for the poor have also been around for decades,
providing customers who were traditionally neglected by commercial banks a way to obtain
financial services through cooperatives and development finance institutions. One of the
earlier and longer-lived micro credit organizations providing small loans to rural poor with
no collateral was the Irish Loan Fund system, initiated in the early 1700s by the author and
nationalist Jonathan Swift. Swift's idea began slowly but by the 1840s had become a
widespread institution of about 300 funds all over Ireland. Their principal purpose was to
provide small loans with low interest for short periods. At their peak they were giving loans
to 20% of all Irish households annually (Besley, 1995).

In the 1800s, various types of larger and more formal savings and credit institutions began to
emerge in Europe, organized primarily among the rural and urban poor. These institutions
were known as People's Banks, Credit Unions, and Savings and Credit Co-operatives
(Cheston and Kuhn 2015). In Germany for example the concept of the credit union was
developed by Friedrich Wilhelm Raiffeisen and his supporters.

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 Their altruistic action was motivated by concern to assist the rural population to break out of
their dependence on moneylenders and to improve their welfare. From 1870, the unions
expanded rapidly over a large sector of the Rhine Province and other regions of the German
States. The cooperative movement quickly spread 5 to other countries in Europe and North
America, and eventually, supported by the cooperative movement in developed countries and
donors, also to developing countries. In Indonesia, the Indonesian People's Credit Banks
(BPR) or The Bank Perkreditan Rakyat opened in 1895. The BPR became the largest
microfinance system in Indonesia with close to 9,000 units. In the early 1900s, various
adaptations of these models began to appear in parts of rural Latin America. While the goal
of such rural finance interventions was usually defined in terms of modernizing the
agricultural sector, they usually had two specific objectives: increased commercialization of
the rural sector, by mobilizing "idle" savings and increasing investment through credit, and
reducing oppressive feudal relations that were enforced through indebtedness. In most cases,
these new banks for the poor were not owned by the poor themselves, as they had been in
Europe, but by government agencies or private banks (Besley, 1995; Boucher et al, 2008,
and; World Bank 2008). Over the years, these institutions became inefficient and at times,
abusive. Between the 1950s and 1970s, governments and donors focused on providing
agricultural credit to small and marginal farmers, in hopes of raising productivity and
incomes.

These efforts to expand access to agricultural credit emphasized supply-led government

interventions in the form of targeted credit through state-owned development finance
institutions, or farmers' cooperatives in some cases, that received concessional loans and on-
lent to customers at below-market interest rates. These subsidized schemes were rarely
successful. Rural development banks suffered massive erosion of their capital base due to
subsidized lending rates and poor repayment discipline and the funds did not always reach
the poor, often ending up concentrated in the hands of better-off farmers. Meanwhile, starting
in the 1970s, experimental programs in Bangladesh, Brazil, and a few other countries
extended tiny loans to groups of poor women to invest in micro-businesses. This type of
microenterprise credit was based on solidarity group lending in which every member of a
group guaranteed the repayment of all members. These "microenterprise lending" programs
had an almost exclusive focus on credit for income generating activities (in some cases

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 accompanied by forced savings schemes) targeting very poor (often women) borrowers. In
Latin America, ACCION International, an early pioneer, was founded by a law student,
Joseph Blatchford, to address poverty in Latin America's cities. Begun as a student-run 6
volunteer effort in the shantytowns of Caracas with $90,000 raised from private companies,
ACCION today is one of the premier microfinance organizations in the world, with a
network of lending partners that spans Latin America, the United States and Africa. SEWA
(Self Employment Women’s Association) Bank. In 1972 the Self Employed Women's
Association (SEWA) was registered as a trade union in Gujarat (India), with the main
objective of "strengthening its members' bargaining power to improve income, employment
and access to social security." In 1973, they did several forums to address their lack of access
to financial services, and the members of SEWA decided to found "a bank of their own".
Four thousand women contributed share capital to establish the Mahila SEWA Co-operative
Bank. Grameen Bank.

In Bangladesh, Professor Muhammad Yunus addressed the banking problem faced by the
poor through a programme of action-research. With his graduate students in Chittagong
University in 1976, he designed an experimental credit programme to serve them. It spread
rapidly to hundreds of villages. Through a special relationship with rural banks, he disbursed
and recovered thousands of loans, but the bankers refused to take over the project at the end
of the pilot phase. They feared it was too expensive and risky in spite of his success.
Eventually, through the support of donors, the Grameen Bank was founded in 1983 and now
serves more than 4 million borrowers. The initial success of Grameen Bank also stimulated
the establishment of several other giant microfinance institutions like BRAC, ASA, Proshika,
etc. The 1990s saw growing enthusiasm for promoting microfinance as a strategy for poverty
alleviation. The microfinance sector blossomed in many countries including African
countries like Malawi, leading to multiple financial services firms serving the needs of
micro-entrepreneurs and poor households. These gains, however, tended to concentrate in
urban and densely populated rural areas. It was not until the mid-1990s that the term
"microcredit" began to be replaced by a new term that included not only credit, but also
savings and other financial services. To date, practitioners and donors are increasingly
focusing on expanded financial services to the poor in frontier markets and on the integration
of microfinance in financial systems development.

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 The recent introduction by some donors of the financial systems approach in microfinance
which emphasizes 7 favorable policy environment and institution building has improved the
overall effectiveness of microfinance interventions. But numerous challenges remain,
especially in rural and agricultural finance and other frontier markets. Today, the
microfinance industry and the greater development community share the view that permanent
poverty reduction requires addressing the multiple dimensions of poverty. For the
international community, this means reaching specific Millennium Development Goals
(MDGs) in education, women's empowerment, and health, among others (Guzman,
J.C.2012). For microfinance, this means viewing microfinance as an essential element in any
country's financial system.

2.2 Theoretical Framework

2.2.1 Empowerment Theory

The research will adopt Empowerment theory as defined by Robbins, S.P., (Chatterjee,
P., & Canda, E.R. 1998). Empowerment is defined as a process by which individuals or
groups gain power, access to resources and control over their own lives. In doing so they
gain the ability to achieve their highest personal and collective aspiration and goals
(Robbins et. Al. 1998: 91). Groups in microfinance come together and to pull together
resources through savings and be able to use their formed groups to guarantee each other
for loans or use same savings as collateral to the loans given to them. Empowerment is
reflected in a person’s capability set. The ‘capability’ of a person depends on a variety of
factors, including personal characteristics and social arrangements (Goetz and Sen Gupta,
2011). Empowerment is the capacity to fulfill this capability and not just the choice to do
so. Sen’s view on women’s empowerment is indicated in his discussion on measurement
of empowerment (Goetz and Sen Gupta, 2011). According to him, the focus should be on
certain universally valued functions, which relate to the basic fundamentals of survival
and well-being regardless of context. These include proper nourishment, good health and
shelter. If there are systematic gender differences in these very basic functioning
achievements, they can be taken as evidence of inequalities in the underlying capabilities,

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 rather than as differences in preferences. Empowerment is also related to the process of
internal change (Mayoux 1998) and to the capacity and right to make decisions (Kabeer
2012). It consists of change, choice and power. It is a process of change by which
individuals or groups with little or no power gain the ability to make choices that affect
their lives. The structures of power (i.e. who has it, what its sources are, and how it is
exercised) directly affect the choices that women are able to make in their lives (Mayoux
2001). From this study women when economically empowered, gain power to run their
own affairs and be able to make financial decisions without intimidation and fear. For
women this would result to increased autonomy, choice, self-confidence and self-esteem
(Sen 2011). Another view of women’s empowerment argues that it needs to occur in
multiple dimensions: economic, socio-cultural, familial/interpersonal, legal, political and
psychological (Malhotra, Schuler and Boender 2002). These dimensions cover a broad
range of factors, and thus women may be empowered within one of these sub-domains.
For instance, the socio-cultural dimension covers a range of empowerment sub-domains,
such as marriage systems, norms regarding women’s physical mobility, non-familial
social support systems and networks available to women. Social capital, social networks,
the capacity to make effective life and community development choices are all related to
empowerment (Krishna 2003; Grootaert 2003)

2.3.2 Relevance of Empowerment Theory to the study

In most developing countries, especially in Africa women are the mainstay of African
economies. They contribute up to 62 per cent of African economies (Nations Capital
Development Fund micro finance report on Africa UNCDF, 1997). The benefits of
promoting women’s economic empowerment thus spread beyond the individual woman
to her children, family, community and the nation subsequently. Empowerment refers to
increased wellbeing, community development, self-sufficiency and expansion of
individual choice. Empowering women economically boosts both gender equality and
wealth of the nations. This entails enabling the women to have the capacity to control
income and other key economic resources like land and animals etc.

The Microcredit Summit Campaign reports that 14.2 million of the world’s poorest
women now have access to financial services accounting for nearly 74% of the 19.3

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 million poorest served by microfinance. Yet women in Eastern Europe and the Near East
lag far behind their sisters in the rest of the world, with 54% and 27% of services
respectively. Microfinance offers a way to provide empowerment for women.
Governments, organizations, and individuals have caught hold of the lure of microfinance
(Abed, E. H, 2000). They hope that lending money and credit allows women to function
in business and society, which in turn empowers them to do more in their communities.
One of the primary goals in the foundation of microfinance was women empowerment.
Empowerment of women through MFI loans is increased self-confidence and increase
self-esteem. Another is women’s increased participation in decision-making (Iheduru,
N.G. 2002). World Education found that the combination of education and credit put
women in a stronger position to ensure more equal access for female children to food,
schooling and medical care. Other studies showed increased ability to make purchasing
choices, manage household funds, and manage enterprise funds.

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 CHAPTER 3

3.0 RESEARCH METHODOLOGY

3.1 Introduction

This chapter gives a description of the research design, study area, study population,
sampling methods and procedures, data collection procedures and instruments, data analysis
and reporting, Limitations and ethical issues that will be used in this study.

3.2 Research Design

The research design will be cross-sectional in nature and will adopt both qualitative and
quantitative methods of data collection where both informal interviews will guide and
quantitative methods of data collection will be used. The research will adopt a descriptive
design. The major purpose of descriptive research design is to describe the state of affairs.
According to Mugenda and Mugenda (1999) a descriptive research is a process of collecting
data in order to answer questions concerning the current status of the subjects in the study.
The primary use of descriptive statistics is to describe information or data through the use of
numbers (create number of pictures of the information). The characteristics of groups of
numbers representing information or data are called descriptive statistics (Kay, 1997).
According to Mugenda and Mugenda (1999) this type of research attempts to describe such
things as possible behavior, attitudes, values and characteristics. This research design is
found suitable for the study since it will offer the researcher a profile to describe relevant
aspects of the phenomena from an individual, organisation and industry-oriented
perspectives.

3.3 study Area

The research shall be conducted in Chiradzulu district, T/A Mpama with a sample from five
villages. This area was chosen as a result of several members from this area involves
themselves in different small businesses especially women.

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3.4 study population

The study population will include women in Chiradzulu district among the 5 villages of T/A
Mpama who have previously held or are currently holding loans from vision fund
microfinance institution. The individual woman will be the unit of analysis. However, due
to financial and time constraints, it will not be possible to study all the women enlisted as
MFIs’ clients in the study area. This would warrant the study with a representative sample.

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3.5 Sampling Methods

Due to the nature of the study and the fact that vision fund borrowers are scattered
throughout the study area, it is hard to choose a suitable sample procedure given time and
resource constrains. It is decided to use purposive sample procedure where existing clients
database formed the sampling frame.

The study population will consist of 10 women whose loans applications with vision fund
were rejected because of anon few reasons in the past months until the study is conducted.
Purposive sampling strategy will be used to obtain sample of these women. The group of
women included in the study will give a balanced view of the challenges women borrowers
face when they approach microfinance institutions for loans.

The researcher will approach vision fund microfinance and request for a register of women
who are currently repaying loans and those whose applications were been declined. This
lists formed the sampling frame for the study.

3.6 Methods of data Collection

Both qualitative and quantitative techniques of data collection will be used for the study.
The quantitative techniques of data collection will highly be used in the study largely
because of the nature of the issues under investigation. The study will employ both primary
and secondary data collection methods. The primary data will be collected through use of
structured and semi structured questionnaire. In order to quantify the challenges women face
when they seek loans from vision fund and to discuss their distribution patterns, some
qualitative data will also be necessary.

3.6.1. Structured Interview

The study will adopted a survey research method in which the main tool for data collection
will be structured questionnaire. The questionnaire will contained closed and open-ended
questions to allow appropriate flexibility for the respondents to explain their responses
while restricting themselves to relevant issues. The questionnaires will be made to be self-
administered and a total of 10 women will be involved in the study as already stated in the
section on sampling. The main advantage of this method is that all respondents will be

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 asked exactly the same questions in the same order. Subsequently, one could be sure that all
their responses related to the same things and is exactly comparable. It is only then that one
would justify in combining the results into statistical aggregated responses.

3.6.2 Focus Group Discussion

Two focus group discussions (FGD) comprising of 5 women borrowers were conducted
composed of women clients of vision fund microfinance. The FGD is important to the study
since it allows participants to explain their thoughts on challenges affecting them when
accessing loans from Microfinance Institutions (MFI). The FGD is used to verify the
information collected using the structured questionnaire.

3.6.3 Key Informant interviews

Key informants will be staffs in microfinance institution (vision fund Malawi). This will
target credit officers and senior managers of vision fund. The interview will addressed
issues and will be listed in appendix three such as historical perspectives of micro-finance
lending in the study area, the challenges borrowers and lenders face, how they were able to
solve them. The researcher will also pursued emerging issues in the industry and make a
comparison how these issues affect women’s access to credit from Microfinance
Institutions. The main challenge in using this method is that the method can be time
consuming and the information obtained might not be directly comparable with that from
the other respondents.

3.7 Data processing and Analysis

After the questionnaires are adequately filled in the researcher coded and entered data in a
spreadsheet for frequency analysis and later analysed using the Statistical Package for
Social Sciences (SPSS). Before processing the responses, the completed questionnaire will
be edited for completeness and consistency. The data will then subjected to computerized
analysis in which frequency tables showing the percentages were produced. Data obtained
from key informants and secondary sources will be subjected to content analysis.

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3.8 Ethical consideration

The researcher will produce an introductory letter for the purpose of convincing
respondents’ participation in the study. The letter explained that the study would be
undertaken purely for academic purposes and their identity and responses would be kept
confidential. They will be assured that confidentiality and privacy would be maintained
throughout the study and even during the report writing stage.

Additionally, they will be told that they were at liberty to decline and withdraw from the
study at any time. They will then be asked to sign a consent form that would be provided at
the bottom of the letter of introduction.

3.9 Limitations

Limitations refer to the conditions that pose a restriction on the scope of the study or may
affect the outcome and cannot be controlled by the researcher. Such reservations or
weaknesses arise when it becomes totally impossible to control all the variables within a
particular project design, or the optimum number of samples cannot be taken due to time or
budgetary constraints.

This is an academic research and the scope is limited. The research team will undertook all
necessary steps required in a full scale research ensuring that the quality of the findings are
not compromised. Time for conducting the research is limited since the research team is
done by a student who is required to conduct the research within the academic calendar.
Financial constraint is also among the limiting factors since the research study is wholly
funded by the researcher.

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References

Abed, E. H (2000) “ Micro-credit, poverty and development: The case study of

Bangladesh”

Adams, Dale W, and Fetchitt, Delbert A, eds (1992) Informal finance in low income

countries. Boulder, colo, Westview press.

AFDB- ILO, (2001). Research Publication on: Growth oriented women entrepreneurs in

Kenya Women entrepreneurs and growthWorld Bank Report 2006

Awiti Adhu (Hon), MP Karachuonyo Constituency (2003), “ Home-grown policies are

key to poverty alleviation” East African Standard, Nairobi, Monday March 24, Letters

PP1

Bardasi, E., Blackden, C.M. and Guzman, J.C. (2007), “Gender, entrepreneurship, and

competitiveness in Africa”, Chapter 1.4 of the Africa Competitiveness Report, June 26,

The World Bank, Washington, DC.

Dionco-Adetayo, E.A., Makinde, J.T. andAdetayo, J.O. (2005), “Evaluation of policy

implementation in women entrepreneurship development”, available

at:www.womenable.com/userfiles/ downloads/ICSB_bestWOBpaper_2005.pdf (accessed

March 30, 2008).

Iheduru, N.G. (2002), “Women entrepreneurship and development: the gendering of

microfinance in Nigeria”, paper presented at the 8th International Interdisciplinary

Mayoux, L. (2000) forthcoming Sustainable Micro-finance for Women’s Empowerment:

A Participatory Learning and Action Approach, UNIFEM

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Mayoux, L. 2001 forthcoming Beyond Rhetoric: Women’s Empowerment and Microenterprise
Development; London and New York, Zed Press.

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