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Micro-Finance: A Reflective Essay

Micro-finance, Gender and Neoliberalism
     Micro-finance, Gender and Neoliberalism are some of the most important subjects in development today. Over the years, microfinance has long been considered as an instrument of development through which the provision of micro-loans to communities is considered to be unworthy of credit by the traditional financial institutions. The idea of microfinance has been in existence for about six decades even before the ideology of development could be thought off.  Microcredit first built momentum after the 1997 Microcredit Summit in Washington, D.C. and the concept reached its peak in 2005 and 2006. The United Nations declared 2005 as the year of Microcredit and micro-credit also became well known in 1983 when Mohamed Yunus and the Grameen Bank won the Nobel Peace Prize. This led to a change in the perception as to how microcredit is been viewed by the world; that is, the poor were now seeing as major entrepreneurs, who have the needed skills and expertise in business, but needed financial resources to initiate their own businesses. This led paradigm shift on how microcredit is been viewed by the world; that is, the poor were now seeing as major entrepreneurs, who have the needed skills and expertise in business, but needed financial resources to initiate their own businesses. At the core of microfinance ventures, the poor are now seen as people who when provided with the right financial resources  and technical support are able to removed themselves from the dumpster of poverty.
Microfinance is the provision of financial services, which include credit, technical assistance, savings and insurance to the “entrepreneurial poor”[1]  In this class, we learned the historical, developmental, operational, and methodological perspective of microfinance paradigm in development discourse and how that process developed over the last few decades providing microloans or credits to the rural poor that have been marginalized regular financial system. In this course we also learned that at the very core of microfinance are microfinance financial institutions (MFIs), which provide technical and financial services to rural and urban poor in both developed and developing nations. It is understood that while microfinance seeks to bridge the gap between the poor and the wealthy it also seeks to target a specific demographic population and in this case women most specially those that work in the informal sector who end up been marginalized and undocumented by the formal financial systems.
Over the years, microfinance through different techniques and strategies have achieved significant progress towards its overall goal; that is, the provision of financial capital to the poor especially women to engage in economic activities as well as enrich their own lives and the lives of those in their respective localities. However, this claim of the successes of microfinance ventures has been met with several critiques. Notwithstanding, these criticisms have yet to provide significant alternative in meeting the financial needs of the poor especially women and children who have been marginalized by the formal financial institutions.
           During the course, we explored the discourse of microfinance as a “development apparatus” from different but interrelated units of community engagements in development. These units of community engagement in development were divided into seven (7) sub-fields from which students’ groups researched, held groups’ meetings, developed annotated bibliographies on those topics, developed a strategic plan on how to carried out such project and also presented their work to the class. This process was engaging, because students took the lead in their educational processes and developed the needed skills necessary in developing and implementing a micro-finance project that is geared towards economic empowerment of the poor especially women and young adults in poor urban and rural settings.
         As stated in the preceding paragraph, micro-finance, gender and Neoliberalism was broken into seven distinct, but interrelated development project areas and these included: poverty alleviation, empowerment, micro-health insurance, housing, monitoring and evaluation, food security, alternative energy, climate change and post-conflict and post disaster. The next section of this paper will present reflections on our group work as well as presentations and strategic plans proposed by other students in the class in addressing the specific topic of their micro-finance development project.
Poverty Alleviation
        According to the United Nations (UN), poverty is defined as a condition that is characterized by severe deprivation of basic human needs, such as food, clean and safe drinking water, and sanitation facilities, health, shelter, education and access to information. It is also noted that poverty is not limited to only access to financial resources, but also access to appropriate services and resources. Poverty on the global stage can be categorized under two main headings; that is, absolute and relative poverty. Absolute poverty can be classified as objective poverty or living standards. Relative poverty on the other hand by comparison between families or one individual against the other. This form of poverty is usually subjective in nature is susceptible to problems. According to the US Census 2010 it measures 48 potential poverty thresholds of which every individual or family member are classified. It is said that if families’ income is lower than that which is defined by their appropriate threshold they are considered to be poor. Internationally, the poverty line is $1.00 a day and in 2005 and 2008 this category was revised to $1.25 per day. In the United States however, the poverty line is around $11,161.00 a day for a single person under 65 years of age and about $21,756.00 for a family between 2-4 individuals.
          Socially, people are classified as poor because of their lack of access to resources and this include pregnant women who cannot afford prehealthcare, education and bureaucracy. Crisis risks that confront the poor centers around death and illnesses of close relatives and friends, natural disasters, fire and accidents as well as theft, robberies and other unexpected shocks. Life-cycle risk includes age, socio-cultural environment and prolongs illness. The group also presented some significant facts about poverty in India, a country in Southern Asia that was used as their case study. It is stated that economic problems in India are intensified by inflation, poor educational standards, and poor infrastructure, balance of payments deterioration, high levels of foreign and domestic debts, increase inequality, large budget deficit and rigid labor laws. The group proposed that the tools for poverty alleviation in India are building assets, mitigating risks and reducing vulnerability.
           Notwithstanding, the group proposed some significant microfinance tools that could be used by India in the process of alleviating poverty among the poor. These microfinance poverty alleviation tools include but are not limited to increasing the income of the poor and broaden their assets base, diversification of the sources of income and the establishment of insurance mechanisms to make sure that the poor can have access to these resources. It is also estimated that in India MFIs gross loan portfolio in USD account for about 4.4 billion as of 2009 and of which about 27 million individuals are active borrowers. It is also asserted that the average loan size is $144.40 and initial deposits in USD are around 204.9 million. Almost the top ten micro-finance institutions in India SKS Microfinance Ltd, Spandana Sphoorty Financial Ltd, and Share Microfin Ltd are the predominant microfinance institutions in the country among the top three.
           In the process of poverty alleviation, microfinance institutions in India and the world over have developed and implemented different microfinance models. Each of these models of region specific; that is, one model has to be tested based on the demographic characteristics of the targeted population of that region. These proposed microfinance models include individual model, group lending, and partnership or intermediaries’ model. The most commonly practiced microfinance model used in India is the Selp-Help Group model and Joint Liability Group/Grameen Model. Each of these models have yield different results, but there are still criticisms that these models still robes off the earnings of the poor which end of profiteering at the expense of the poor.
            The strategic plan on the page 5 details that group conceptual framework in implementing micro-finance initiatives that will reduce the levels of poverty in India. The conceptual framework divides the services of the micro-finance project into non-interest based source funding and interest based source of funding and how that process interplay with poverty alleviation in India. Another aspect of their strategic plan that needs to be pointed out here is that partnership in healthcare and education. This is significant because the micro-finance institution by itself cannot solve India’s problem, but will rather need to network in partnership with other institutions to achieve this goal.

       This group presented their work on microfinance and empowerment with the motto “Let’s Empower and Develop” (LEAD). The vision of their work is to strive for effective microfinance institution to create endless opportunities for disenfranchised women throughout the world social and economical empowerment. The mission of their work is to empower women in rural villages in India by providing them with small loans. The goals of their project is to link women to existing services and infrastructure, build information networks, increase women’s economic activities and set up large programs to enable funding from international donors as well as develop sustainable livelihoods, community development and social services and at the same time increase women’s contribution to household income. Empowerment was defined in their work as a “process by which individuals’ and groups gain power, access to resources and control over their own lives thereby gaining the ability to achieve their highest personal potential and collective aspirations and goals. Chart 1:2 shows the links between microfinance initiative and women empowerment and how that has led to economic growth. The chart also demonstrates that woman’s decision making capacities can be enhanced and improved if they have access to financial resources in which they can also have a saying in the family decision-making process and also contribute to the larger community.
The group also proposed five essential steps that are relevant in the process of implementing the micro-finance framework for women empowerment and this process include training, facilitation, advocacy, illumination and liberation which is the final stage of the general framework. However, they also proposed several steps in reaching these essential steps and those include taking stocks, setting goals, developing strategies and documenting processes.
Monitoring and Evaluation of Microfinance
         The presenters assert that microfinance which understands the economic activities of women and knowing the difficulties they are in can help to empower women. Building the empowerment focus in to the microfinance project or program also can help to empower women. Moreover, concentrate in empowerment will lead the microfinance lenders maintain high levels of operational and financial sustainability. However, focusing on women’s empowerment limits microfinance lenders to access funds from bilateral and multilateral donor agencies. They also point out that microfinance impacts the decision making of women for their lives and their families. Microfinance also makes women more confident in lives and improves their status and gender relation in their homes.
Furthermore, microfinance can improve women’s family relationship and reduce domestic violence. In addition, microfinance improves women’s status and involvement in their communities. In political pint of view, microfinance can help to enhance women’s rights. Besides, they also portrays some negative impacts limitation to empowerment of microfinance such as controlling of loans, burden that microfinance activities place on women.
For example in Rural India the focal point with a particular survey of 6000 people with the aim to analyze the access poor people have to finance and the reasons behind it. There is a discussion surrounding the Self Help Group linkage model (SHG) and the various pros and cons that are associated with the model. Also there is a focus on the need to ‘scale up’ the approach so that more poor will be reached and have access to microfinance.
Monitoring and Evaluation (M&E) of microfinance initiatives are relevant in checking the “bottom line” of development work; that is, checking to see if the MFI making a profit and what difference is that process creating? It is only through M&E that we are able to review our progress and make significant changes to our projects for desire outcomes. We are also able to identify problems and challenges through M&E during the planning and implementation stages. Through this process we make adjustments to on-going projects and future projects to minimize shortages or risks. It is essential to conduct M&E because it allows us to determine if we are reaching our objectives or not, review progress, makes assertion about our methodology, improve best practices and document credibility and legitimacy of programs’ objectives and scope.
         In order to conduct an effective M&E for microfinance initiative, there are some relevant questions that need to be asked during the M&E process and they include whether or not the program is gender sensitive, how is it addressing issues of a specific community, what is the host environment of the relevant MFIs, how many jobs have been created, what is the relationship to the local environment in which the project is been implemented, how open is the program to others, how accessible is it to members of the community, are the goals and objectives been met? These are some of the many questions that need to be asked during the M&E processes.
It should however be noted that monitoring and evaluation is an on-going process of the MFIs. It could be quarterly or done at the end of the year. The decision as to when to conduct the process is organizational specific and also depends on other factors. It must be a part of an organizational strategic plan. The M&E process include impact assessment, learning and action, empowerment, utilization and Meta Evaluation. All IAs have a conceptual framework at their heart. There are three main elements to a concept framework:  A model of the impact chain that the study is to examine, the specification of the units, of levels, at which impacts are assessed, and the specification of the types of impact that are to be assessed.
 Microfinance for Housing

This group presented their research on micro-finance for housing and looked at specific references to MFH in Ghana, Afghanistan and India. They presented a specific model of housing micro-finance as a model for improving housing units for poor people. They are also presented information on the scope and objectives of micro-finance for housing initiatives, which are aim at providing affordable housing units for poor people, loans to purchase land and provision of technical support in the process of attaining the right legal documentation for their land.
This presentation explored the issues of providing finance to individuals and families who can’t afford the current global crisis with the increase in mortgage finance for their homes. It is “estimated that about one-sixth of humanity-1 billion- currently lives in slums.” Thus, the need to provide microfinance availability to individuals and families for housing is the focus of the study. Microfinance is a tool that can be used in reaching this goal, which developed over several decades ago. In most cases, microfinance loans and enterprises were used explicitly for financing housing, but there were no framework and structure for microfinance for housing (MFH). Microfinance for Housing has two parents’ initiatives and these are: “microfinance institutions and group advocating and supporting low income housing.” Microfinance for Housing (MFH) first started in Latin and Central America and spread throughout the world. 
MFH is a subset of microfinance, which is designed to meet the housing needs of the poor, especially those without access to the banking sector or formal mortgage loans. It is strategically designed for low-income households who wish to expand or improve their dwellings, or to build a home in incremental steps, relying on sequential small loans.

The above conceptual framework provides a detail of how micro-finance for housing can be developed and implemented to yield potential results. According to this model, micro-finance for housing products includes housing construction, housing improvement, land acquisition. The legal aspects include lending requirements, beneficiaries profile, relevant government policies, norms and procedures. The repayment factors include technical assistance, loan disbarment, repayment records, and interest rate; while, the institutional factors include organizational structure, funds mobilization and actors.
Microfinance in Post-Disaster Haiti
This group presented on how micro-finance can be used as a development tool in post-disaster settings. Plagued by tropical storms, floods, and hurricanes, Haiti has a long history of struggling with Mother Nature. Every two years, and sometimes more often than that, the country is inevitably struck by a serious natural catastrophe.  On January 12, 2010, Haiti was devastated by a 7.0 magnitude earthquake. The quake took the lives of 222,570 people, left over 1,000,000 homeless, and destroyed most public service buildings, ranging from schools to hospitals to the presidential palace. The country was devastated by the historic earthquake.
Haiti currently has over about 196 formal micro-finance institutions yet the poverty rate in the country remain very high and it is even increasing at a fast pace. A total of about 240,000 Haitian are involved in some kind of micro-finance initiative from one or more of the above MFIs lenders. The credit portfolio of MFIs in Haiti is around 82% petty commerce, 5% services, 4% consumption and 4% housing.
Most Haitian like any other citizens of developing countries that were stroke by natural or human–made disaster cannot be qualified to get loan from the formal financial sector, thus their peculiar situation to rely on MFIs for the needed microcredit or loan to engage in some sort of micro-business.
The Staircase Model-Haiti
The model helps clients to gradually climb up the stairs as they build their micro-loan portfolio by taking loans and paying off the loans on time. This model was developed in response to the earthquake and they have scaled up the first two steps as a direct response in order to expand and retain our clientele, bolstered by our cash grants It was impossible to continue with our group lending focus Scaled down the staircase model to focus on individual grants to circumvent the problem.
Microfinance for Health Insurance
This group presented on microfinance for health insurance and look specifically at micro-health insurance. Microfinance for health insurance can be defined as the protection of low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved and they specifically looked at full service approach to coverage, partner agent linkages and social health insurance.
There is a link between microfinance and health insurance and this is such that low-income people do not have access to private health insurance plans for a variety of reasons. The provision of microfinance health insurance coverage and services to the poor has the potential to decrease risks associated with health shocks, smooth consumption patterns, and increase savings as well as improving their overall health.
 Full Service Model
This group also focused their work on Nepal as a case and recommends that in order for the health needs of the poor people to be address the “Full Service Model” is essential towards that direction considering the country’s history, geography and sociopolitical climate. This model involves MFIs having a dual role in the process of providing healthcare and running the insurance process.
Social Health Insurance Model
They also recommended that considering the status of the poor people in Nepal the social health insurance model is the ideal strategy, because government run; price-scaling system. This process will ensure economic security which will involve the payment of higher premium and poor pay low-premium.
The Partner Model
This model will involve other national and international actors in the process of providing microfinance health insurance coverage to rural and urban poor people. By this process, the cost of the services will be shared by all major players and not only rest on the MFIs.

[1] Fernando, Jude (2011). “Course Description of Microfinance, Gender and Neoliberalism.” Spring 2011.


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