Critically assess the potential of micro-credit initiatives for reducing poverty and promoting womens empowerment.

Illustrate your answer with reference to examples. After declaring 2005 Year of Microcredit, the United Nations made clear that this instrument was allocated a central role in the achievement of the Millennium Project in its poverty-related aspects. However, building a financial network in an existing economy requires many constraints that will be further analyzed, leading to the recognition that microcredit alone cannot ensure both poverty alleviation and womens empowerment. So why does microcredit need to be part of a multidimensional approach to contribute to these purposes? At first the initial approach to microcredit and its limits will be covered. Then, the focus will be placed on the possible ameliorations to make it a more efficient tool against poverty. The simplified vision of microcredit as the solution to poverty and womens empowerment Microcredit stirred a keen interest in the 1980s because it created an opportunity for poor people to access financial services at a micro scale. Fighting poverty by developing human capital revealed to be insufficient while credits may bring long term effects by the constitution of a physical capital. Moreover, microcredit does not require previous capital in order to be granted. The banks safety rests on the group lending system, allowing many households to gather some assets to start entrepreneurial activities in jobless economies. Therefore, microcredit bears a virtual spiral leading to the increase in incomes which raises poors standard of living (F Leach 2002).1 Microcredit is all the more encouraged because of its consequences for women2, especially targeted for their reliability in loan repayment. Substantial improvements in womens life are made possible, as control over loans may strengthen their implication in the households decisions. However, despite the optimism, many pointed out the failures of a microcredit relying on the fact that the structural causes of poverty and inequalities cannot be erased by microfinance alone. The inherent complexity of the introduction of microcredit: between exposed successes and hidden disenchantments The most powerful critique of microcredit is that it does not address the poor. Only those who already have an asset or a business have a chance to build a regular income and eventually
1 2

. The example of the BancoSol bank is one of the successful balance found between sustainability and outreach. In 1998, 95% of the Grameen Bank clients were women.

make it to the poverty line. Moreover, the increase of income is often short lived and small (Judith Shaw 2004, 1247). Many factors such as geography shape the success of microcredit3. Equally important is the high rate of dropouts due to borrowers unwillingness to attend the groups meetings and their incapacity to repay on time because of the MFIs lack of flexibility (Richard Meyer 2002)4. When it comes to empowerment, mens exclusion from microcredit can be counterproductive (Fiona Leach 2002, 585)5. Furthermore, the fungibility of credit makes the question of woman empowerment irrelevant if the men are to take control over the loan. More importantly, access to income does not reduce intrahousehold inequalities. Finally, social constraints such asa patriarchal ideology (Rahman 1999, 149) may prevent their involvement in a microcredit program. Then, microcredit is not that accessible. This is there is a need for more investigation prior to microcredits implementation. The fundamental lack of instrument and methodology to evaluate the impact of microcredit Studies of microcredit impact in a country often show opposed conclusions. For instance, it is either reported that microcredit helps women to acquire a total control over their loans and expenses or that their situation worsened and that the violence in their household increased. To explain these contradictions, Naila Kabeer (2002) highlighted that the validity of indicators measuring empowerment depends on how they capture changes in terms of gender inequalities rather than household living standard. Positive reports tend to use other reference than the increase of womens autonomous behaviour in decision-making whereas negative reviews are based on an individualized definition of empowerment. This led to define empowerment as an expansion in the range of potential choices (Naila Kabeer 2002, 81). But in general, no study brings evidence of the failure of microcredit as a whole. This is first due to an obvious lack of following up. Second, the information that could be used are neither transmitted nor even collected by the local MFI or NGOs. Adding to the lack of material, there is the difficulty to measure the impact of microcredit on rural, seasonal and risky economies (Khander 1998, 30).

Another factor is the type of activity targeted. In Sri Lanka, the distinction between survival or entrepreneurial activity was central to calibrate microcredit and evaluate its efficiency (Judith Shaw 2004). 4 The subsidy dependence is regularly pointed out because it can affect the outreach to the poorest people. 5 Women are perceived as a threat when they are given a sudden economic autonomy so that the men refuse their participation.

The improvement of microcredit by its integration in a broadened perspective As Jonathan Murdoch stressed, microcredit should be separated from its initial focus on micro business development in order to respond to the upside downs incomes issue. Simple measures can be taken such as the rise of loans amounts or the adaptation of repayment schedules (Richard Meyer 2002, 358-360). Besides, studies often underline the potential of saving based accounts in reaching the poorest households. In post conflict Bougainville, such an approach was successfully combined with a participatory credit to rebuild the economic tissue (John Newsom 2002). Another example is the system of self help groups in Africa that proved effective on long term basis. However, supporting participatory microfinance means heavy long term costs for the institutions. Concerning women, the mere registration of loans and assets under their name (Linda Mayoux 2002, 29) can contribute to their empowerment. But, the men have to be integrated in the process through awareness programs for instance. Social values must not be underestimated because they greatly influence the outreach of microcredit and the womens involvement. Microcredit has a lot to offer if intertwined in a global financial and social perspective. A mere neoliberal response to poverty is bound to fail because poverty is reproduced by other factors than investment. Women related strategies remain relevant as long as the focus is put on the reduction of inequalities rather than the autonomy. Microcredit must be taken for what it is, a modest instrument contributing to the global issue of poverty.

References
Books: Khander, S.H., 1998 Fighting Poverty with Microcredit: Experience in Bangladesh, London, Oxford University Press, Rahman, A., 1998 Women and Microcredit in Rural Bangladesh. An Anthropological Study of Grameen Bank Lending., Westview Press, Articles Kabeer, N., Conflicts Over Credit: Re-Evaluating the Empowered Potential of Loans to Women in Rural Bangladesh, World Development, Vol. 29, No. 1, 2001, Pp 63-84. Leach, F., Microfinance and Womens Empowerment: A Lesson From India, Development in Practice, Vol 12, No. 5, November 2002, Pp: 575-588 Mayoux, L.,Microfinance and Womens Empowerment Rethinking Best Practices , Development Bulletin, no 57, 2002, Pp 76-81. Meyer, M., The Demand for Flewible Products: Lessons From Bangladesh, Journal of International Development, Vol. 14, July 2002, Pp: 351-368 Newsom, J., Bougainville Microfinance: Rebuilding Rural Communities After the Crisis, Development bulletin 57, February 2002, Pp: 85-88 Shaw, J., Microenterprise Occupation and Poverty Reduction in Microfinance Programs: Evidence From Sri Lanka, World Development, Vol 32, No. 7, 2004, Pp: 1247-1264