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Contribution of microfinance on women empowerment case study of Vision Finance company ltd Nyaruguru

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Protestant institute of arts and social sciences - Bachelor's degree in Business studies with education 2016

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The biggest cultural constraint on women's empowerment through microfinance programmes doing research is the culture of patriarchy pervasive throughout Asia. The patriarchal culture is dynamic and thus exercises constraints in different contexts, in varied forms and at various stages in the empowerment process. These include bargaining power and the ability to make decisions on economic issues within the household, ability to make decisions outside the household, control over loans, building of social networks, responsibility for household chores, and power over one's time and physical and emotional health and energy.

2.5. Critical literature views

But Burger (1989) observed that microfinance tends to stabilize rather than increase income, and tends to preserve rather than create jobs. In the same view, Arbuckle et al (2001) cited by Nalunkuuma (2006) indicates that studies carried found little to recommend that micro credit has any significant impact on enterprise incomes. Evidence by Coleman (1999) suggested that the village bank credit did not have any significant impact on physical asset accumulation; production and expenditure on education. The women ended up in a vicious cycle of debt as they used the money from the village bank for consumption and were forced to borrow from money lenders at high interest rates to repay the village bank loans so as to qualify for more loans. However, impact for women who had access to bigger cheaper loans from the village bank was significant. The main conclusion of the study was that credit is not an effective tool for helping the poor to enhance their economic condition and that the poor are poor because of other factors (like lack of access to markets, price shocks, un equitable land distribution) but not lack of credit. A study of 13 MFIs in seven developing countries concluded that households' income tended to increase at a decreasing rate, as the debtors income and asset position improved (Mosley and Hulme 1998) cited by Okurutet al (2004).Similarly, Hulme and Mosley (1996) cited by Lont and Hospes(2004) in a study made on Twelve lending institutions providing micro-lending services in seven countries found that the impacts of microcredit on the poor were on average small or negative relative to the control group.

Results by Diane and Zeller (2001) in the study done in Malawi also suggested that microfinance did not have significant effect on household income. Fisher and Sriram (2002) stress that access to microfinance services protects the poor against the often severe consequences of fluctuating incomes, ill health, death and other emergency expenditures. Despite the overwhelming claims that microfinance credit works best for the poor people, Johnson and Rogaly (1997) argue that poorest borrowers become worse off as a result of credit and that it makes them vulnerable and expose them to high risks.

Using gender empowerment as an impact indicator, some studies argue that microcredit has a negative impact on women empowerment (Goetz and Gupta, 1994). Goetz and Gupta (1994) as cited by Kabeer (2000) using a five point index of `managerial control» over loans as their indicator of empowerment. At one end of their index are women who are described as having `no control' over their loans: these are women who either had no knowledge of how their loans were used or else had not provided any labor into the activities funded by the loan. At the other end are those who were considered to have exercised `full' control, having participated in all stages of the activity funded by the loan including the marketing of the produce. The study found that the majority of women, particularly married women exercised little or no control over their loans by this criterion.

Sebstad and Chen (1996) as cited by Lont and Hospes (2004) in their summaries of the thirty-two research and evaluation reports found that micro lending to women had positive impacts on their empowerment in Asian countries. However, reports from African programs found very little or no impacts of microcredit on the empowerment of women. In the same studies, credit had a positive impact on households' income, but the impacts on health, on the nutrition level of family members, and on children's attendance at schools were not conclusive.

Also the view that it is the less badly-off poor who benefit principally from microfinance has become highly influential and for example was repeated in the World Development Report on poverty (World Bank, 2000) cited by Montgomery and Weiss ( 2005).

Simanowitz and Alice (2002) put it clearly that, the microfinance industry has concentrated not on reaching the poor but rather on financial and situational performance. Meanwhile Mayoux (2001) argues that microfinance institutions are undergoing a period of rapid innovations. They are coming up with products and new methodologies for reaching the broader category of poor people including the poorest of the poor. This will enable microfinance to have a significant impact in achieving poverty reduction.

Also where group lending is used, the very poor are said to be excluded by other members of the group, because they are seen as bad credit risk, jeopardizing the position of the group as a whole. Similarly, it's argued that when professional staff operates as loan officers, they may exclude the very poor from borrowing, again on the grounds of the repayment risk (Montgomery and Weiss, 2005).

Simanowitz in regard to groups points out that while the use of the groups has the potential to build social capital, develop skills; the way they are used varies considerably between MFIs. Some use them solely as means for creating peer group pressure while others use them more deliberately as vehicles of the empowerment (Simanowitz, 2003).

From the above discussions, we realize that core issues remain how to make microfinance accessible to the poor and ensure that the benefits are positive. For the purpose of this study, the above theoretical debates form the bedrock to explore into the role of microfinance in poverty reduction in Rwanda.

This analytical framework is build on the ground that if the MFI mission and objectives are geared towards poverty reduction, then the terms, conditions and methodology and product design have to be favorable for the poor to access the microfinance products and services which will be reflected in the outreach; how many poor people are reached (scale of outreach), how poor are the clients (depth of outreach), in which economic sectors are they engaged (breadth of outreach), where do they live (geographical outreach) and the quality which is how the services fit the needs of potential clients. Depending on whether the poor have been reached with microfinance, then impact may be expected in terms of:

(i) Income generation,

(ii) asset building and reduced vulnerabilities defined as increases in ownership of household's physical assets and reduced vulnerabilities as the poor are encouraged to save and diversify their livelihood activities,

(iii) empowerment which means enabling the poor to have greater control over the resources and their lives and taking part in family and community decisions,

(iv) Building social capital implying reduced isolation, opportunity to share information and building the bond that was not previously there.

(v) Good health in terms of improvement in nutrition and afford medical care, and education of clients' children which is investing in children's education as a result of new income from micro-enterprise. This will in turn lead to poverty reduction on women and all family members.

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