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Microfinance Empowerment Or Localized Neoliberalism Notes

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This is an extract of our Microfinance Empowerment Or Localized Neoliberalism document, which we sell as part of our Gender and Development Notes collection written by the top tier of University Of Warwick students.

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*Link - 1.2 Feminism & Difference / 1.3 Theorizing & Gendering Development / 1.4 Men, Masculinities & Development // PO203

2.10 Microfinance

PO353 (2.4) - Microfinance: Empowerment or Localized Neoliberalism?

Debate the pros and cons of microfinance, and its effects on recipients and their families. [2018]

Critically assess the effectiveness of microfinance as a tool for female-focused development in the global South. [2017]

Critically assess the extent to which microcredit schemes empower women on a sustainable basis.


Microfinance - the provision of financial services to unemployed or low-income individuals who may otherwise be excluded and face exploitative options. It includes microcredit, savings, insurance, remittances,
transfers, etc.

Whereas conventional banking requires permanent employment, a verifiable credit history and/or collateral (i.e. a formal financial identity), microcredit gives small loans to poor women via neighbourhood groups ('solidarity circles') for income-generating projects without collateral.

Modern microcredit is generally considered to have originated in the Grameen Bank, founded in Bangladesh in 1983 by local economist, Professor Mugammad Yunus.
◦ Premised on the Women in Development (WID) paradigm*

Indicators of success
Microfinance has been eulogized by scholars and practitioners of development as a 'panacea' or 'magic bullet' for poverty alleviation worldwide.

In 1998, the UN General Assembly declared 2005 the 'International Year of Microcredit' in recognition of its contribution to poverty reduction, and towards achieving the MDGs.

Yunus and Grameen Bank jointly awarded the 2006 Nobel Peace Prize 'for their efforts through microcredit to create economic and social development from below'.

As of 2009, an estimated 74 million people held microloans that totalled US$38 billion.


Promotes credit as a human right, granted on the basis of trust; thus challenging negative stereotypes about the poor as 'untrustworthy' or 'defaulters'
◦ 'Citing the 98% rate of recovery (rivalling CitiBank), Yunas argues that the poor are good investments for large banks because they repay their debts - i.e. they are 'bankable'

'Not only is capitalism good for the poor, the poor are good for capitalism' [Yunas]

'Consumption smoothing' - helps to regularize income flows and mitigate the immediate vulnerability of households to external shocks. Places them in a better position to secure access to healthcare and child education.

Nurtures ('repressed') entrepreneurship, self-sufficiency and autonomy
◦ 'The Grameen Bank model rests on the idea of the out-of-home entrepreneur who, with the help of microcredit, becomes self-employed, owns private property (assets she builds with the loans), and sells her labour on the market' [Karim, 2008]

Social capital & female empowerment
◦ Improves the organizational capacity of poor women as a basis for their social mobilization - 'It has taught women the importance of managing money, and keeping basic account of expenditures. Additionally, it has introduced new forms of social identity among rural women, such as weekly meetings where women collect and discuss loan proposals, and the creation of a space where women can speak without men dominating the discourse.' [Karim, 2008]

Enables interactions with microfinance staff, offering emotional support and rolemodel inspiration  initiates new socialization processes within the community*.Access to linked services, e.g. livelihood training, legal advice

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