Gender and Microfinance

1. Gender and Microfinance Jonathan Morduch World Bank April 30th, 2007

2. Outline • Reaching Women • Why Women • Evaluating Impact • Beyond Credit • Looking Forward

3. Reaching Women • 10.3 million in 1999  69 million in 2005 • 570% increase • 84.2% of total clients Source: Daley-Harris, Sam (2006). “State of the Microcredit Summit Campaign Report 2006”.

4. Women Served Source: Daley-Harris, Sam (2006). “State of the Microcredit Summit Campaign Report 2006”.

5. Why Women? • Women make up a large and growing segment of the informal-sector • Women tend to be more credit constrained • Commercial banks focus on men because men form a larger portion of the formal sector

6. Source: The United Nations, 2000. The World’s Women 2000: Trends and Statistics. Chart 5.13, p. 122

7. Financial Impact: Targeting women customers can improve repayment rates

8. Financial Impact • Women are better customers • Higher repayment rates • Conservative in investment strategy – more risk averse • More vulnerable to peer pressure and threat of public humiliation • Less access to credit which reduces risk of moral hazard • Hossain (1988): 81% of women had no repayment problems versus 74% of men. • Khandker et al., (1995): 15.3 % of male borrowers were “struggling” in 1991 versus 1.4% of female (missing some payments before the final due date)

9. Financial Impact • Women are better customers • Less mobile • Reduces monitoring costs – for bank as well as peer monitoring • Enables women to attend repayment meetings (if applicable) • Less argumentative • Lower staff costs • Institutions can hire more female staff

10. Financial Impact: But institutions targeting women have tended to be less profitable as loan sizes remain relatively small

11. Evaluating Financial Impact • As MFI’s scale, the % of women clients decrease • Small scale – 75.3% women borrowers • Medium scale – 64.5% women borrowers • Large scale – 55.2% women borrowers • For-Profit institutions tend to serve fewer women clients • Not for Profit – 71.9% women borrowers • For Profit – 54.5% women borrowers

12. Source: MicroBanking Bulletin, Issue No. 12, April 2006

13. Development Impact: Targeting women has a greater impact on social and economic development

14. Development Impact • Women are poorer • UNDP Human Development Report (1996): 70% of the world’s poor, about 900 million women • Women spend on household consumption as opposed to personal consumption • Pitt and Khandker (1998): Empirical studies have shown that women are more likely than men to direct additional income to household consumption • Working women contribute to economic growth

15. Empowerment Impact • Increases women’s decision-making power • Pitt et al., (2006): Women’s participation in credit programs leads to women having greater role in household decisions, social networks, and greater freedom of mobility. Increase spousal communication about family planning and parenting concerns. • Improvement in domestic interactions • Third party scrutiny of household abuse • Intervention with Microfinance for AIDS and Gender Equity (IMAGE) study demonstrated reductions in levels of intimate-partner violence in participants.

16. Empowering Women with Micro Finance: Evidence from Bangladesh- Mark Pitt, Shahidur Khandker, Jennifer Cartwright • Study estimates the impact of participation in micro credit program on an index of empowerment • Uses data from household survey from 1998-99 • Uses qualitative, self-reported responses to questions around women autonomy and gender relations in household

17. Study Design • Original 1991-92 survey • 1,789 households -1,538 target (59% participated in program) and 260 nontarget • 40 program villages • 22 female-only groups • 10 male-only groups • 1998-99 follow-up empowerment survey • 2,074 households with married couples • 80% of question were asked only to wives

18. Study Design • 10 Empowerment Factors • Purchasing • Resource • Finance • Transaction Management • Mobility and Networks • Activism • Household Attitudes • Husband’s Bahavior • Fertility and Parenting • All Variables

19. Study Results • Female credit produces statistically significant improvements in – • Autonomy with purchasing households assets • Access to and control over economic resources • Ability to raise emergency funds • Role in deciding and implementing household borrowing • Power to oversee and conduct major household economic transactions • Mobility and networking • Awareness and activism • Discussions around family planning and parenting

20. Study Results • Female credit does not increase husband’s opinions and actions • Male credit effects on women’s empowerments were largely negative – specifically on women’s control of resources, finance, freedom of movement and fertility and parenting decisions

21. Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines- Dean S. Karlan, Nava Ashraf, Wesley Yin • “…but you must bind me hard and fast, so that I cannot stir from the spot where you will stand me… and if I beg you to release me, you must tighten and add to my bonds.” -- The Odyssey

22. Overview • Developed new “commitment” savings product for Philippine small, semi-rural, for-profit bank • Randomized control evaluation design • Developed survey methodology to identify “hyperbolic” individuals using hypothetical time preference questions • Developed follow-up survey to measure impact on female decision-making power and household outcomes • Sample frame: poor but “banked” (prior clients) of the bank

23. SEED:A Commitment Savings Product • Withdrawal restriction • Either time-based (140) or amount-based (62) • Decided entirely by client • Deposit incentive • Ganansiya box – 167 out of 202 tookup  • Automatic transfer – 2 tookup  • Same interest rate as regular savings account • Hence, loss of liquidity is uncompensated • Note: Given combination of account features, not possible establish causal link of any one feature to impact • Note: Features could work for self-control OR spousal-control reasons

25. The Commitment Savings Product

26. Randomized Experimental Design

27. Measuring Impact

28. Magnitude in Real Dollars • Doctor’s visit: 150 pesos • Public school fees are 150 pesos/year, plus ~200 pesos/month for special projects • 1 month supply of rice for a family of 5: 1000 pesos

29. Follow-Up Survey: Female Empowerment • Conducted one-year after experiment date • Nine decision categories such as family planning, financial and consumption decisions • Record whether principle decision-maker is respondents, the spouse or both for each category • Reponses assigned values of two, zero and one respectively

30. Measuring Impact: Self-Reporting • Constructed two decision making indices • Equally-weighted mean of each response - 0.14 standard deviation increase for treatment group • Linear combination of individual responses to each question – 0.25 standard deviation increase for treatment group • Average effect is largely driven by increase in decision-making ability for women below the median (initially less empowered)

31. Measuring Impact: Observing Purchases • Three categories for expenditures • House Repair, Female-oriented Durables (washing machine, kitchen appliances etc), Other Durables • Women below median • Increase in items purchased and total expenditures of consumer durables associated with female use • No increase in other non-female specific durables • Indicates that women were able to use their power in households to purchase goods that were beneficial to them • Women above median • Increase in items purchased is smaller and not statistically significant

32. Study Results • Average savings increases by 85% for those who took-up • Average savings increases by 24% for those who were offered • ~34% of SEED clients actively using the account • Female empowerment through increase in female decision-making power • Increase in self-reporting by women • Increase in women oriented durable purchases

33. Evaluating Finance, Development and Empowerment Impact: Critical Perspectives

34. Evaluating Development Impact • Women do not control all loans • Goetz and Sen Gupta (1996): 40% of women have little or no control over their loans • Difficulty in scaling businesses due to limited resources (including skills and experience) • Difficulty in scaling businesses due to greater risk and debt aversion

35. Evaluating Development Impact • Income generation responsibility may lead to heavier workload and more stress • Mayoux (1999): Lack of substitute care for children and elderly leads to added pressure

36. Evaluating Empowerment Impact • Pressure to pay back loans can lead to domestic pressure and violence • Contrary to the IMAGE study, per Rahman’s study 70% of women expressed increase in violence (based on one village) • Limited empowerment outside the household • Mayoux (1999): Less evidence of socio-political empowerment due to presence of inflexible social norms and traditions

37. Evaluating Empowerment Impact • Unclear evidence on endogeneity of empowerment and microfinance • Are women involved in microfinance already empowered?

38. Beyond Credit: Toward cost-effective ways to enhance development and empowerment impact on women

39. Beyond Credit • Johnson (2000): Mainstreaming and institutionalizing gender • Incorporate gender issues in normal service delivery • Equality of women’s access to services and mechanisms • Require asset registration in woman’s name • Equal employment opportunity for women as staff • Products and programs that respond to women’s needs and demand • Commitment Savings Product • Karlan et al., (2006): Access to commitment savings product in Philippines had positive impact on female decision-making power within household

40. Beyond Credit • Education and consciousness-raising programs • Pro Mujer - Health Education • BRAC Bangladesh – Integrated Training • Support collective group learning for both men and women • RADAR IMAGE Collaboration in South Africa