I have been researching on a new topic. I find myself drawn to financial issues within the development discourse. My observations from the field in various countries illustrate that the supposedly backward, underprivileged people in rural areas are innovative, inventive, entrepeneurial- plain and simple go-getters. They know if they fail to get an income somehow, there will be no bread going into their stomachs. They usually have more than 3 mouths to feed. So they think of ways to earn a few coins.
They might set up a small mobile snack or tuck shop selling things from a trolley or a basket they place on their heads while seeking customers. They sell eatables, such as corn, pakoras, and other typical snacks, women may sell hair accessories, elastic or cotton ropes (azarband). Or they may work as servants, do handicrafts and sell them through a middleman or nowadays, NGOs. In general, the so-called unskilled are very skilled in something. In this respect, I don’t understand when the development studies literature discusses the non-economically active or unentrepeneurial poor. When they commonly complain that micro finance programs seem to work with the poor just above the poverty line, or the economically active poor, I find this very confusing because to my understanding, even a beggar is economically active because at the end of the day, they never go home empty handed. However, it could be the economically poor I have mentioned are unsuitable for microfinance/ credit programmes because although they manage to make a living by their small enterprises, their incomes are irregular and whatever revenue they accrue there is nothing left for savings. Or it could be that whatever is left once household and business expenses have been met, the rest is saved in a community rotating savings fund, and hence joining a microcredit scheme is unnecessary from this perspective.
Nevertheless, successful participation in a microcredit scheme requires a regular income flow to repay the loans taken. Moreover, it requires an income which allows money being set aside to repay a microcredit loan after other responsibilities have been provided for. It could also be that for some reason local money lenders seem a better source of temporary funds than an NGO provider due to more accommodating repayment arrangements. There are many reasons which seem thinly covered by the academic literature. It could also be that focusing on the non-poor of the poor segments is much easier and less challenging. Afterall poverty eradication is supposed to deal with structural issues of inequality and deprivation.
Reality, however is different. The structural issues are usually not dealt with because it requires an acceptance of reformist views by the powers that be, as well as a functioning legal system. Something which in most developing countries remains non existing due to lack of implementation of rules and regulations. If looking from the perspective of women’s empowerment, how effective are micro-finance/microcredit programmes if structural issues remain unaddressed? According to the literature, microcredit programmes target women because their repayment rates are better. Moreover, even if the loans go to men to support their income generation by buying a cart, it is argued that it still benefits the household because it shows women as a source of income. In this connection, there is an element of empowerment engendered by microcredit programmes.
Nevertheless, what are the actual effects/impacts of micro-finance on women empowerment? Confidence, awareness and busineness knowledge may increase, but at the social/society level how much is that actually worth and does it bring the desired change, or does it contribute to disempowerment at other levels? How are these processes manifested within the household? If it is effective, to what extent does microfinance serve women’s long term goals of economic independence? This last bit is rather vaguely covered in the literature. Only a negligible fraction of women have gone on to become SMEs through micro credit schemes. The ones who do are not micro-credit clients. They have managed to gain funds through personal savings or family loans. The microcredit loans are too small amounts and participating in the group meetings is a waste of their time. The question regarding women empowerment, micro-finance credit, enterprise development remains unanswered. There are different case studies on microcredit ventures. Some studies with negative results, others with positive results depending on the organizational backing such Grameen Bank and the World Bank. And yet, microfinance programmes such as credit projects are an important tool in the poverty eradication drive because even if the loans are repaid, subsequent loans are taken on and repaid. They support tailoring skills, husband’s trade, sometimes they go to pay for health and education or weddings even. They serve as a lifeline in difficult times. If previous loans have been taken out, their loan record might speak for itself and act as a guarantee that the loan will eventually be repaid.
In this connection, and finally, micro-credit programmes are not wastage of resources, and do contribute to social and economic uplift of the poor. However, there is a need for better clarification of financial services and goals of micro finance programmes, as opposed to just meeting output objectives. Moreover, the question remains, what is to be done with those households where microcredit does not work? How can their deprivation be targeted?