Women's Empowerment and Microcredit: A Case Study from Rural Ghana.

In recent years, microcredit has dominated popular attention, especially among practitioners and scholars who are interested in ways to improve the economic and social conditions of the “third world”. However, much of the literature on microcredit comes from advocates who are hastily enthusiastic about its potential to reduce poverty, mitigate gender inequities and improve the overall healthiness of impoverished communities in poor countries. As such, a great deal of the literature on microcredit is promotional. Many are anecdotal stories of individual women and men working to build opportunities to empower and enrich themselves despite difficult circumstances and meager resources. This has led to an injudicious bias about microcredit’s power to correct social ills associated with poverty and about its ability to permanently abate the strangleholds of pauperism. Take for example the passage below from Smith and Thurman (2007) authors of A Billion Bootstraps: “Fatoumata Monomata lives in Burkina Faso, one the poorest countries in Africa where average life expectancy is only 44 years. Since childhood, she has known about a terrible disease called malaria, but she and her neighbors did not know how it was spread, how to protect themselves, when it would strike, and what kind of medicine would help. Malaria, a ruthless killer, swept through her village repeatedly, stealing the lives of countless children. Fatoumata feared for her children, but she had no idea how to protect them. She obtained a microloan along with information about nutrition and malaria from Freedom Hunger. She used the loan to buy nuts and potatoes to sell. She increased her income enough to buy medicine, insecticide-treated mosquito nets, and nutritious food for her children. With her loans, she was able to get a wagon, which further increases her profits. Fatoumata shares her wagon and new knowledge with her neighbors so they too can improve their incomes and health.” (p.84) These kinds of accounts are very common and easily found in books and technical reports on microcredit as well as the web pages of microcredit organizations such as Grameen Bank, ACCION, FINCA (Foundation for International Community Assistance), and PRIDE (Promotion of Rural Initiatives and Development Enterprises). The power of these testimonies have inspired hundreds of millions of dollars in monetary donations from major global financial institutions (such as Citigroup, AIG, Visa, The United Nations Capital Development Fund (UNCDF) etc.) and from individuals interested in microdevelopment efforts in “third world” countries. Academic research on microcredit is burgeoning in the fields of economics, development and demography. Since the early 1990s, there has been spate of theoretical and empirical articles on microcredit. Many support microcredit as a development strategy while a growing number of others are critical and suspicious about microcredit’s ability to correct longstanding social ills and improve national economies. For example, Scully (2004) raises several important questions about microcredit’s ability to fill the void of formal wage work and empower women within existing patriarchal structures. Likewise, Goetz and Gupta (1996, p.45) and Hanak (2000, p. 313) raised concerns about the disproportionate burden women bear in repaying loans they may not have full control over. To date, most of the research on microcredit focuses on Asia and Latin America. Too few studies explicitly examine theses processes in Africa, and even fewer in rural Africa. It is unclear if patterns revealed in Asian and Latin American will hold in Africa. The goal of this study, therefore, is to build on the few formal studies of informal banking systems in Sub-Saharan Africa. Using rural Ghana as a case study, I evaluate the extent to which participation in these systems is associated with women’s empowerment status. Why Ghana? Microcredit operations have a long history in Ghana. They date back centuries and are believed to have come to Ghana via Nigeria (Asiama 2007). There are three categories of microfinance in Ghana. First are formal banking institutions that provide savings and loans to a small minority of wealthy, usually urban, individuals with high net worth. These banking institutions also include commercial banks that reach only about 5% of Ghanaian households (Steel & Andah 2003). Clients of these financial institutions are usually required to meet a high minimum deposit and provide proof of steady employment. Second are Ghana’s semiformal financial institutions. Banks in this category are registered but are not licensed by the Bank of Ghana. They include credit unions, financial non-government organization and cooperatives (Asiama 2007; Steel & Andah 2003). And third are informal financial systems locally referred to as esusu. As discuss later, esusu are informal banking clubs or rotating saving and credit associations (ROSCAs) that provide credit, savings, loans and insurance to those with little or no financial collateral and net worth. Informal banking institutions play a very important role in Ghana. According to Steel and Andah (2003:4), about 60% of the money supply in Ghana circulates outside of formal banking institutions; thereby making semi-formal and informal financial systems an essential feature of private sector development. Additionally, considering that nearly two-thirds of Ghanaians live in rural communities and more than half of those rural dwellers live below the poverty threshold, informal banking projects as medium of development and poverty alleviation are particularly vital (Steel & Andah 2003). Further, in Ghana (as elsewhere in the world) women own disproportionately less of the nation’s wealth, and are more likely to be self-employed than men (71% and 52% respectively) and therefore less likely to earn formal wages (DHS 2008). Additionally, compared to men (22%), women (37%) are more likely to report being illiterate and having less education at the secondary and post-secondary levels. As a result, informal banking projects are often touted as having great potential for women’s empowerment. Women, particularly those in rural communities, often turn to informal banking clubs, like esusu as a means of savings, loans, and credit for self-employment ventures, social insurances (for wedding, births, and funerals), and to help meet basic household need and schools fees. Lastly, Ghana is an important focal point for the discussion of economic growth because it continues to outpace other West African nations en route to development. In the 1957, Ghana was the first sub-Saharan African country to win its independence; and in 1969 was the first West African nation to outline a public policy that addressed population and development goals. Today, Ghana is being praised for having made such bold efforts as both poverty and fertility levels have fallen significantly (national poverty rates decline from 50% to 28% between 1991 and 2006; and total fertility rates have decline from 6.4 in 1988 to 4.0 in 2008).