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EMPOWERING WOMEN ECONOMICALLY THROUGH MICROCREDIT- PROSPECT AND CHALLENGES: THE CASE OF SOME SELECTED CREDIT SCHEMES IN THE EASTERN REGION OF GHANA Abstract BY Mercy Asamoah, CRIG, Box 8, New-Tafo, E/R. The terms empowerment and micro-credit (or microfinance) have become common household words in recent years. Empowerment is used to describe a wide range of concepts and outcomes and to advocate for certain types of polices and intervention strategies (Malhotra, et al, 2002). Micro-credit (or microfinance) refers to a wide range of organizations dedicated to providing micro financial services, including non-governmental organizations, credit unions, cooperatives, private commercial banks, non-bank financial institutions and some state-owned banks. Although most countries have had long experience with informal community-based financial systems, the commercial provision of financial services to poor populations has expanded rapidly only in recent years. The main objective of this study was to explore the relationship between micro-credit and women s economic empowerment. The study also sought to identify some of the challenges faced in implementing micro-credit schemes. It was carried out in the eastern region of Ghana and employed the survey method using structured and semi-structured interview guides. It also used focus group discussions, case studies and literature search for data collection. Of the 266 participants, 180 (women participants) were formally interviewed using questionnaires. The rest (86) were engaged in semi/informal and key informant interviews as well as in group discussions. The results indicated that the design used by the micro-credit schemes suited the characteristics of the poor and significantly empowered the women both economically and socially. Economically, the working capital, turnover, profit/incomes and the savings of participants of micro-credit schemes had significantly improved. Socially, participants were able to finance their basic needs and by implication had increased self-confidence to participate in intra-household decisions on investment. The micro-credit schemes provided easy access to credit using social collateral in the form of peer/group support and pressure. They encouraged a culture of savings and repayment habits. A major challenge faced by the credit scheme was how to scale-up operation to reach a larger demand in an effort to match outreach with sustainability, given the many logistical constrains faced by most of the credit schemes. 1.0 INTRODUCTION The International Year of Micro-credit, 2005 underscores the importance of microfinance as an integral part of our collective effort to meet the Millennium Development Goals. Sustainable access to microfinance helps alleviate poverty by generating income, creating jobs, allowing children to go to school, enabling families to obtain health care, and empowering people to make the choices that best serve their needs. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives. The quotation above (by the former United Nations General Secretary, Kofi Annan) shows the importance the UN places on micro-finance as a tool for poverty alleviation and empowerment. Microfinance is broadly defined as the provision of small-scale financial services such as credit, savings and other basic financial services to poor and low-income people. Microcredits are usually secured through mutual guarantee of solidarity groups. Such loans were used for various purposes, including investments in micro enterprises and petty trading activities and agricultural production. Most micro-credit clients are female heads of households, pensioners, displaced persons, retrenched workers, small farmers, and micro-entrepreneurs. A wide range of organizations provide microfinance services and they include nongovernmental organizations, credit unions, cooperatives, non-bank financial institutions and some state-owned banks. Although most countries have had long experience with informal community-based financial systems, the commercial provision of financial services to the poor has expanded rapidly only in recent years. Poor people have in general had adequate access to credit for a various reasons; notably, their lack of collateral, the perception that poor people are bad credit risks, and the typically higher transaction costs associated with small loans. Solutions to the challenges have been provided through the introduction in the 1970s of successful microcredit experiments in Latin America and South Asia, notably the Grameen Village Bank model (see appendix I). The micro-credit models demonstrated that the poor are creditworthy. Assessment of the programs has shown that loan repayment rates are generally high despite their lack of collateral. According to Daley-Harris (2004), under the right conditions, access to financial services, particularly micro-credit, enables poor people to increase their incomes, build assets and reduce their vulnerability to crises. He further indicated that there is evidence that access to credit has given many poor people the means to increase, diversify and protect their sources of income. In Zimbabwe, participation in the Zambuko Trust increased the consumption of high protein foods among extremely poor client households while in India, SHARE noted a marked shift in the employment patterns of its clients from irregular, low-paid daily labour to diversified sources of earnings, increased employment of family members, and a strong reliance on small business (Daley-Harris, 2004). Similar results have been found for Ghana. It is estimated that 80 per cent of the clients of the Freedom from Hunger organization had secondary income sources, compared with 50 per cent of non-clients. Mayoux (1998) noted that increasing women's access to micro-credit has the tendency to initiate a series of 'virtuous spirals' of economic empowerment, increased well-being for women and their families and on the wider scale, on social and political empowerment. Beyond increased opportunities and income, micro-credit programs are believed to engender selfconfidence and a culture of independence such that women are able to believe in their own agency to significantly improve upon their lives. Micro-credit schemes espouse the assumption that the lack of capital, business management experience and training are the main barriers to the economic progress of the poor and the limit to the growth of potential micro enterprises. Therefore, they incorporate financial access with training and business management skills, which are critical inputs for effective implementation. Micro-credit schemes could therefore be described as pro-poor because of such characteristics as their reliance on trust and social collateral, frequent weekly repayment and little or no paper work. Their record of high loan repayment and growth also seem to suggest that micro-credit indeed has potential for the empowerment of the poor. Micro-credit schemes may take three different forms or a composite of all the three forms namely, the capacity building approach, the channelling approach and the institutional approach. The capacity building approach focuses on the very poor, the landless, the powerless, the voiceless or the assetless, especially women. The aim is to raise awareness, organise the clients and build their confidence to enable them believe in their own ability to transform their lives and to develop savings culture. The channelling approach may be used by rural banks and nongovernmental organisations to assist the not-so-poor or productive poor. These groups may have the courage to take some minor risks but may lack financial support because of the lack of collateral security. In this case, the function of the scheme could be limited to credit intermediation, extension and peer-pressure. The institutional approach is more embracing and may be used in places where there are no financial institutions. In this environment, poor women especially could be helped through the institutional approach where they are given the opportunity to mobilise their own savings through the group formation and linking them up with a financial institution. Since disempowerment is characterized by high illiteracy, low economic status, lack of access to resources, low decision-making power, lack of income, a culture of dependence, and lack of collective action according to Buvinić (1989), any or a combination of these three approaches could be adopted to effectively empower the target clientele. But what constitutes an empowerment? Empowerment is a process by which people take control of their lives or gain the ability to generate choices, exercise bargaining power, develop a sense of self-worth, and a belief in one s ability to secure desired changes (UN, 2001). It is also defined as the expansion in people's ability to make strategic life choices in a context where this ability was previously denied to them Kabeer (2001). In her contribution, Mayoux (1998) defined empowerment with specific reference to micro-credit as a process by which powerless people become conscious of their own situation and organize collectively to gain greater access to public services or to the benefits of economic growth . To add to the above, Bennett (2002) described empowerment as the enhancement of assets and capabilities of diverse individuals and groups to engage, influence and hold accountable the institutions, which affect them. In all these definition, empowerment is seen as a process and involves the ability of the poor to transform their lives. It operates from below i.e. from the grassroots and involves the ability of individuals and/or groups and also on availability of resources. It can take place at a hierarchy of different levels namely individual, household, community or national level. The Problem Despite the expansion of micro-credit, there seem to be divergent opinions regarding its effectiveness in empowering poor women and which group of people should be the target clientele i.e., whether the extreme poor or the not-so-poor. The debate, according to Daley-Harris (2004) is muddied by imprecise definitions and the lack of clarity about which poverty groups are being discussed. Initially the argument centered on the perceived requirement that only the economically active poor be targeted because they were the only group who could use loans successfully and that the extreme poor (i.e. those living on less than a dollar a day) could not make good use of a loan. The extreme poor would only want and need a safe place to keep their savings and perhaps need social protection programmes that could help them with obtaining their basic needs (see The most nuanced articulation on the issue can be found in a paper by Robinson (2001) in her discussion of financial services in the poverty alleviation toolbox. Robinson argues that neither credit nor savings accounts are appropriate for the extremely poor households. Instead, she argues for job creation, skills training, and provision of adequate water, medicine and nutrition. She believes that providing savings accounts and credit makes sense only for the economically active poor (and non-poor groups). However, Daley-Harris (2004) noted that while he strongly agrees that access to financial services may not be the answer for everyone, he neither sees any systemic evidence nor theory to conclude that savings are more appropriate than credit for the poorest who seek financial services. On one hand, some studies have provided evidence in support of micro-credit as a useful tool for the empowerment of the poor. For instance, a study of Grameen Bank suggested that women participants in credit programmes were more conscious of their rights, better able to resolve conflicts, and have more control over decision making at the household and community levels (Chen, 1992). According to Pitt and Khandkar (1995), credit to women has positive effects on increases in women's asset holdings (except land) and is a significant determinant of total household expenditure. Another study on Project Ikhatiar, a micro-credit scheme in Malaysia, revealed that monthly household income of those involved in the project increased by 72 percent within a period of eighteen-months of the project s commencement and 98 percent of the increases was attributable to the project s loan services (Heyzer, 1996). Increases in income also lead to improvements in autonomy, enhanced self-worth and self-confidence in participants. Other studies have also reported benefits such as discouragement of early marriage, improved diet patterns, improved status and participation in public life and in female decision-making (Kabeer, 2001; Navajas, et al. 2000; UNFPA, 1992; Uprety, 1990; and Buvinic, 1989). These positive findings have been questioned by other studies (Buvinic, 1989; Kerr 2002; Navajas et al, 2000). Kerr (2002) has argued that on its own, micro-credit could sometimes increase women s disempowerment through higher debt and work burden since credit by definition is a liability that must be paid by all means. A review of the literature suggests that there is still little primary data in the Ghanaian context to show whether micro-credit holds any prospect for the empowerment of the poor, especially, those in the rural areas. The reason is that most of the organizations dealing with micro-credit have not developed a method for tracking changes in levels of women's empowerment as a result of the credit intervention since they lack baseline data. As Malhotra et al. (2002) noted, they just assume that empowerment would be an implicit outcome of access to micro-credit. In this regard, the main objective of this study is to empirically find out the relationship between micro-credit and women s empowerment. The study seeks to identify the background characteristics of micro-credit beneficiaries, their frequency of access to loans, their expectations on the loans and its impact on their economic and social livelihood. The study also outlines some of the challenges in implementing such schemes with the hope that it would serve as a guide for future policies and strategies concerning microfinance and women s empowerment programmes in Ghana. 2.0 METHODOLOGY The study was carried out in the eastern region of Ghana and employed the survey method using structured and semi-structured interview guides. It also used focus group discussions, key-informant interviews and literature search for data collection. Overall, 266 people were involved in the study, of which 180 (women participants) were formally interviewed using questionnaires. In deciding on the sample frame, the basic criterion was that the client should have received micro-credit (loans) at least once or should have participated in the scheme for a minimum period of eight months by which time the clients were believed to have had some experience with the facility. In this regard, a list of 230 women who satisfied the criterion was obtained from the micro-credit institutions studied. In addition, 12 former members of the institutions were identified with the assistance of the local leaders and informally interviewed with the aim of understanding why they dropped out of the groups. All new members in the schemes (about 62) were also engaged in focus group discussions and in informal interviews to know their reasons for joining, as well as their perceptions and expectations from the scheme. In addition, twelve key informants were interviewed. The data was analysed quantitatively using SPSS version 13 and qualitatively based on interpretive understanding and perceptual observation by respondents and informants. The use of both quantitative and qualitative methods ensured complementarities of information, a way of triangulation in order to study women s empowerment from more than one stand point. Quantitative methodology according to Sena (1997) assumes that society can be described and understood according to an ontology that is committed to seeing social behaviour as an empirically evident and quantifiable object of investigation. Therefore, it was deemed very appropriate to assess the economic empowerment of women using indicators to measure the impact of micro-credit on the business performance of the women. In addition, since empowerment is a gradual process of positive transformation in the individual s life, there was the need to rely even more on qualitative information collected through in-depth and informal interviews, group discussions and semi-structured interviews. Qualitative research stresses the validity of multiple meaning, structures and holistic analysis as opposed to the criteria of reliability and statistical compartmentalization of quantitative research (Osuala, 2001). This method was thus very appropriate to capture more personal testimonies from women participants of micro-credit schemes in order to analyze the empowerment processes in their lives. Fieldwork for both qualitative and quantitative data collection was undertaken between April 2005 and July 2006 with logistical support from the Cocoa Research Institute of Ghana. The study conceptualised the relationship between micro-credit and women s empowerment in simple terms as shown on figure 1. The framework purports that a woman's current status (A) is determined by her personal characteristics and resources available to her. It is assumed that all things been equal, if the background is favourable as in (Bi), the woman would be directly empowered socially and economically (E). For instance, if a woman is educated and gainfully employed, she would more likely and easily be able to educate her children to a higher level than a woman who lacks education and/or employment. Rao (1998) also points out that a woman s education, income and freedom from violence favour children s caloric consumption. On the other hand, when a woman has a poor socio-economic background (B2), the ability to transform her live and those of her children would be extremely difficult if not impossible without an external assistance. Given that the majority of Ghanaian rural women are poor, illiterates and lack access to key productive resources like credit, they are more likely to be lower in status, experience low self-confidence and lost of hope for themselves and their children. Their ability to transform their lives would thus, depend more on external factors that have the potential to develop their individual abilities and also grant them the needed financial resources to back their choice and opportunities. It is in this respect that micro-credit schemes, as in (C) with their innovative and pro-poor activities such as lending to the poor without physical collateral, training and better guarantee system, have gained increased support as a tool for the empowerment of poor women. Since the majority of women depend on self-employment, their ability to enhance the performance of their businesses lead to economic empowerment (D), which in turn, translates into social empowerment of women (E). It is further conceptualized that when business performs well, profits would increase and women would be able to pre-finance their needs, invest more in their children s education and be able to participate confidently in household decision making. It is noteworthy that generally the relationship that has been existing between men and women has been that of dependency where men have more control than women. This dependence relationship make women less assertive and less influential when it comes to taking decisions and/or taking financial risks due to lack of the purchasing power. It is therefore, theorized that if micro-credit is made available to women it would produce ec
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