IS MICRO FINANCING WOMEN PROFITABLE?
RIZWANA BASHIR (firstname.lastname@example.org)
Jan 25 - 31, 2010
Gender biasness is global practice of microfinance providers for several reasons. Interestingly, MFPs with commercial focus prefer women for their good and timely debt repayment abilities, at the same time MFPs having poverty alleviation focus also give preference to financing women most deprived and underprivileged segment of the society.
There is a fear that this partial focus may lead to damages to business cycle and in that case, it will not be a favorable situation for micro financiers.
The most important reason is that a good repayment does not guarantee profitability. Certainly, profitability leads to financial stability of MFPs. There is another argument that says that targeting women is indeed more costly for diverse reasons.
To begin with, women borrow smaller amounts, they are novice, have less exposure, and mostly poor women are not educated, and they necessitate supplementary services (healthcare, training etc.) and sometimes additional supervision. Therefore, a focus on women takes the financial performance of an MFP beyond repayment rates.
The positive repayment effect associated with a focus on women is offset by higher costs related to smaller loans.
Undeniably, the role of women in society is very important and it depicts the potential for development in a nation. Specially, a country like Pakistan having around 50 percent female population cannot achieve economic growth and prosperity without empowering its women. Studies show that when women are given access to financial services it improves standard of living.
A research study reveals that MFPs have average 63 percent female and 37 percent male clients.
MALE/FEMALE AVERAGE CLIENTELE RATIO IN MFPS (IN %)
MFP CATEGORY MALE CLIENTS FEMALE CLIENTS RSP 54 46 MFI 0.5 99.5 MFB 72 28 Others 28 72 Overall Ratio 37 63
Through an analysis of male/female focus by MFPs in Pakistan, we can also find out their success in reaching the core poor for poverty alleviation purpose because women are characterized as the most deprived or poorest segment of the society.
Numerous research studies as well as Dr. Muhammad Yunus of Grameen Bank emphasize the purpose of microfinance is to empower poor specially the women. Generally, women are kept away from financial resources while they are responsible for household management. Providing them with the resources and powers also strengthens the family.
Women are generally regarded as hard working and committed. They repay loans on time when compared to male borrowers. For this very reason, currently MFPs in Pakistan prefer female to male clients.
CATEGORY WISE MALE/FEMALE CLIENT RATIO IN PAKISTAN
Analysis of male/female ratio category-wise shows that what type of MFP in Pakistan focuses on male clients and which category of MFPs focuses on female clients. Figure 1 indicates the greater inclination of all MFPs towards female clients except of MFBs and RSPs. The 'others' category is the largest in size in Pakistan amongst all types of microfinance service providers. It displays 72 percent female client and only 28 percent male clients. Consequently, it can be said that if they have above 70 percent female borrowers then overall there is large proportion of female clients as compared to male clients.
The basis for more attention towards female clients is their hard work, perseverance, and determination to discharge liabilities on time. MFIs have 99.5 percent female clients whereas only 0.5 percent male clients. Like NGOs and CFIs categorized in 'others', MFIs also largely consider it to be more feasible to provide microfinance services to female clients. The ratio of male clients is slightly higher then females in RSPs but the difference is diminutive. Only MFBs believe in offering their services to more male clients as they currently have 72 percent male clients and only 28 percent female clients. Since banks usually are more concerned with cost of managing the loans, therefore they find it profitable to offer microfinance to male clients.
Even some MFPs do not have any male client and their 100 percent focus is on female clients. There is no doubt in acknowledging the positive role of microfinance in women's lives. In some cases, women have significantly changed their lives and earned respect and status in the society through microfinance. This empowered status also results in a decline in domestic violence on women. In the end, the current female focus can be continued only if MFPs remain sustainable themselves in doing so.
(The writer is lecturer Defence Authority College of Business, PhD Fellow University of Karachi)