e international africa house would provide access microfinance unbanked

One of the key benefits highlighted about Oxfam’s Saving for Change Initiative is the empowerment provided for women. Women are argued to be more independent, able to organise within communities, and provided with a voice of power. However, are women empowered?  In the cases of microfinance in Cameroon, Mayoux (2001) highlights the inequalities operating within community groups. The message is we cannot rely on communities, and social capital, for empowerment as women within such communities have different relations to power. The ability for women to use savings and credit for self-empowerment is limited by wider, traditional, gender inequalities. Microfinance may act to reinforce unequal power relations and positions within society.  Furthermore, women’s empowerment needs to be understood as complex. [1] Real, and strategic, empowerment for women goes beyond increased access to economic resources. So how can microfinance ensure true empowerment?  [1] See further readings: Sutton-Brown, 2013.

Can we rely on business to solve social problems? Ultimately the model proposed through microfinance schemes is the creation of a consumer market where risks are already high. This has shown to be one of the key factors of microfinance failing in South Africa (Bateman, 2013). The microcredit provided across South Africa, post-apartheid, aimed to solve social problems - however, it has acted to support risky consumption not investment. With a lack of secure incomes, due to high levels of unemployment, underemployment, and informal employment, the rate of repayment is low. Households have been forced into severe poverty by being provided with credit which they can’t pay back. Even among those who do invest how many of their business ideas will succeed?

The provision of microfinance within livelihoods is based on a positive view of social capital [1] and cohesion. The idea relies upon a perception whereby social networks within the community are able to positively organise funds and remain democratic in how they manage poverty. It fails to acknowledge negative aspects of social capital - such as how networks can act to exclude and restrict who becomes a part of the scheme. Civil society is not without internal politics, with competing interests, and can be uncooperative.  [1] Social capital represents the relationships and linkages between people and/or groups, of which are formulated with rules and norms. See further readings:

Loans provided are embedded with conditions, which can constrain what an individual can do with the money. A microfinance loan is still a loan, it needs to be paid back, if someone is in poor health for a long period they will run into difficulty. Can saving schemes enable social protection in the long term when the amount saved is just enough to cover one sick person? We need to realistically evaluate what the loan enables, provides, and how long for. To provide real health security a much more comprehensive finance system is needed, such as insurance

There is a need to reinvigorate Africa’s agricultural system; however, the ability for microfinance to do this is debatable. The distribution of loans is not necessarily adequate or responsive to the need. The loans provided need to be able to provide security and protection in the face of environmental crisis. There are some things microfinance can’t solve; more variable rains and desertification for example. Loans can only be provided if the risks are known and the risks are getting higher so too will be the costs of loans.  Additionally, multiple factors are responsible for Africa’s agrarian crisis. The lack of an agriculture marketing board for farmers to control price, insufficient infrastructure, and the legacies of structural adjustment, all act to constrain the agricultural system.

Africa’s microfinance schemes can be different, and are fundamentally different. Across Africa there is a history of informal lending. Microfinance is not new, but rather embedded in traditional practices. This means communities are aware of the obligations, rules, and practice of microfinance.  Additionally, the path taken by microfinance lenders shows stricter controls are being taken to ensure that the loans are not subprime. In a bid to ensure the safety of the poor the Bank of Ghana has set up minimum capital requirements for the borrower and new regulations to ensure money-lent is repayable.

All policies have barriers and potential disadvantages and for a scheme to be rolled out the advantages must outweigh the costs. In the case of microfinance advantages are higher. Microfinance has a low cost for implementation, and can therefore be distributed nationwide. Rolling out microfinance schemes means a majority of the population will become able to access vital services through a flexible loan.  Microfinance not being able to reach everyone is not a reason to enable it for those it can reach. If bad governance prevents sustainability then something needs to be done about governance – it does not invalidate microfinance as a concept. And all those involved in supply do have close enough objectives to run the scheme there simply needs to be compromises to ensure they remain the same.

Microfinance does not have to be short term financing. Because it is a community based loan that is based on trust if those wanting the loan can explain why they want a loan over the longer term then it is possible to get longer loans. Moreover long term investment should not be something those who are struggling day to day have to think about; such investments as education should be made by the government not relying on individuals to realise their long term interests. No one would argue that microfinance is the solution to a poor education system.