Is Microfinancing Empowering Women In South America - Research Paper Example

? Is Micro financing Empowering Women In South America? This paper examines how microfinancing empowers women in South America. Following the Theory and Practice of Triple Helix Model, this paper analyzes the dimensions affected in the wider Latin America in the empowerment of women. Several indicators that are used to determine if women are empowered have been examined in this paper. The historical power struggles of women in South America have been discussed and the improvement made in relation to women empowerment through microfinancing explored. This paper concludes that the effects of microfinancing have a positive influence to women empowerment in Latin America. This paper also concludes that the overall empowerment level of women in Latin America is significant and provides spaces for women to run viable businesses and contribute to family’s income. Introduction Microcredit, in a wider dimension called microfinance, has in the recent years become a much favored intervention not only for poverty alleviation but also for empowering women across the South American countries (Hofstede, 2012). Microfinance is an economic development approach that has evolved so as to benefit low-income persons all over the world. The term refers to the provisioning of financial services by financial institutions to their low-income clients. The general financial services are savings and credit; although some microfinance institutions provide payment and insurance services. The definition of microfinance should include both the financial and social intermediations for it to empower women (Inter-American Development Bank, 2012). Microfinance activities involve: * Small loans, usually for working capital * Streamlined microcredit disbursement and monitoring * Informal appraisals of investments * Collateral substitutes, such as compulsory savings and group guarantees * Access to larger repeated loans, based on the performance of a person’s repayment * Securing savings products (Hofstede, 2012). The microfinance industry in Latin America is comprised of numerous number of institutions that can be categorized in 3 groups. The first group is the NGOs which largely provisions financial services to micro entrepreneurs. Besides the financial services, these NGOs provide business development services such as business trainings and consultancy. This is the group that contains the largest number of institutions in Latin America (ACCION International, 2011) The second group is those institutions that formerly were NGOs but have up scaled their financial operations and are currently regulated by the banking systems of their country. This can be group can be referred as microfinance Institutions. The last group the commercial banks that have now targeted the low income earners into their trade. This combination of microfinance providers represent what is in the modern age referred as the commercialization of microfinancing in Latin America. Microfinancing is a potential phenomenon that that is used in Latin America to alleviate poverty (Attay, 2007). Empowering women however in micro finance would require several. Microfinance is a potential tool that can have a powerful impact on the process of women empowerment. Women empowerment is a multifaceted process that is characterized by change in a person although all individuals (Unite for Sight, 2010) experience it differently. Women across the South American countries profit from microcredit and other financial services. Strengthening the financial base of women and is an important role in empowering them. However, women are not only empowered by providing them with direct credits. This paper examines the perspectives under which women are empowered (Lee, et al. 2010). Problem Statement When examining the impact of microfinancing on women empowerment in Latin America, the following challenges were experienced by the field of microfinance in this region. First, it is important to note that one the key role of microfinance is providing accessible financial services to the poor or for the purpose of this work, the poor women who have been neglected by the commercial banks. Most of these banks are available in the cities while the majority of the poor neglected women are in the rural areas. Therefore the one of the challenges of the Micro Finance Institutions is to reach the women in the rural areas (Ramirez, 2011). The other problem is for the MFIs provide both the social and commercial mission simultaneously. MFIs have more than the commercial mission. Markowski (2002, p.117) says that MFIs are faced with dual mission. The commercial mission- “ to provide viable financial services to their clients in a feasible manner” and the social mission- “ to improve the welfare and livelihood of low-income individuals by providing financial services”. The purpose of this study is to examine the level to which both these missions are fulfilled by the MFIs across the South American countries so as to determine whether the women are indeed empowered by microfinance (Anderson, 2010). Triple Helix Theory Triple Helix is a concept that has been introduced to model the relationship between the universities, the government and the industry, the three main spheres of the Triple Helix model. The purpose of the model is the establishment and sharing of knowledge mostly in the developing countries. Zawdie, 2010 notes that innovation is a fluffy process that necessitates the production dissemination and sharing of knowledge between these institutions (Zawdie, et al. 2011). The new knowledge based Triple Helix model is therefore an evolution of knowledge production that builds on the old models of knowledge production. In the old models of knowledge production, labels such as universities, government and industries was still present but in the new model, they have changed in meaning in the development process of the transformational system. The change in meaning however, does not imply a loss or rather a change in differentiation in the transformational system but rather further developments intended to tackle new emerging challenges in these institutions (Zawdie. & Saad, 2011). It is important to understand that the social systems remain dynamic in nature and competition is still at a high level in these institutions and therefore the need to reshape the traditional models of development. This is the core objective behind the development of Triple helix model which was developed by professor Henry Etzkowitz of Newcastle University and professor Loet Leydesdorff of the Amsterdam University in the 21st century. Sources: www.routledge.com/books/details/9780415475167/ Microfinancing In South and Latin America Microfinancing works for the development and performance processes that gives women the opportunity to remap their day-to-day activities and in so doing empowering them in the Latin American society. Using microfinance, women in Latin America are running viable businesses and contributing to family income (Hofstede, 2012). Many small businesswomen according to research indicate them as having opened up their grocery shops, poultry and livestock businesses, pottery, bangle shops, vegetable vending, and beauty parlours among others from capital obtained from microfinance (Lee & Alexander, 2010). Microfinance programs in Latin America have been dynamic , innovative and profitable to women (Anderson, 2010). According to Anderson 2010, Since 1972 the micro-enterprise programs first emerged, microcredit movements has ever since blossomed and become accessible throughout Latin America (Anderson, 2010). Many micro loans techniques has emerged ever since but this paper analyzes the general topic of microfinancing using the Triple Helix theory and its applicability in Latin America. In this region, microfinancing has operated in the platform that touches the three institutional spheres presented by the triple helix theory (Christen, 2011). Business First it is important to state that microfinance both in South and Latin America are operated by state owned banks in addition to the private banks credit unions, financial intermediaries and other non bank and non profit financial organizations (Inter-American Bank, 2012). All these financial institutions operate microfinance reaching out to the wider community with microfinance services and retail banking. The microcredit was used in the 1980s to boost small businesses under integrated programs context that seeks to empower the poor, low income families, minorities and women (Baumol, 2010). In the 1990s, the microcredit programs were used to support employment agendas when the oil crisis recession struck the South and Latin American region (Zawdie & Saad, 2011). Jobs became scarce and many young people as well as the formerly working class citizens shifted from formal to informal employments. The policy makers realized this shift and used microcredit programs to support informal employment agendas in the region (Christen, 2011). By late 1980s microcredit was widely hyped as a means of strengthening the private sector and its emerging markets (Anderson, 2010). In 1990s however, microcredit began to be understood as a tool by the government to eradicate poverty (Cooper, et al. 2013). However, ever since its emergence, microfinancing has always been viewed as a significant means of empowering low-income earning women. Microfinancing through the years has experienced endless shifts in the grounds of its support to the public. It has remained an important tool that has been used by the government and other non governmental financial institutions in poverty eradication and a source of low-income earners to start businesses and meet their family objectives. Microfinancing has been an important part of the national developments systems similar to other systems such as the communications systems or the electrical development grid (Zawdie & Saad, 2011). Globally outside the Latin America region, microfinancing that began as a tool of supporting small business through microcredit has transformed into a massive microfinance industry. This massive industry has seen major achievements such as the achievement of the 2005 Nobel peace Prize to Dr. Mohammed Yunus the professor of economics who founded the concepts of microfinance and microcredit as a means to combat poverty across the globe. Application of Triple Helix Theory More recently across the South American and Latin America countries, microfinance is taking a new dimension that involves integrating the business, government, and universities. The universities are sending their students in the microfinancing institutions (Auyeung, et al. 2010). Moreover, the microfinancing institutions in order to improve their services provision and operations are using many financial researches from the universities. The government on the other hand ensures that the financial institutions provide these services in a manner that is easily accessible, affordable and safe to the public. It is worth noting that the role by financial institutions to provide savings money transfers, and national payment facilities is highly supported by the government by policies that move beyond credit provisions to the poor (ACCION, 2011). A number of many South and Lation American countries are members of the G20’s Global Partnership for financial inclusion (GPfi) and the alliance for financial inclusion (AFI) (Ministry of Economy and Public Credit, 2010). This is an integration that describes the application of Triple Helix model by microfinancing sector across the Latin America companies. Challenges facing Latin America Microfinancing Sector The major challenge is the competitive environment under which the microfinancing institutions in South America operate in. Competition is between micro financing institutions that provide the client group with the traditional micro-lending approaches and those that use new techniques which involve incorporating new banking technology, and management techniques (Auyeung, et al. 2010). The high competition environment means that profits are clutched up in the Latin American microfinancing markets. Currently the cost per client has risen to a high up as the numerous institutions targets their clients (Inter-American Bank, 2012). A good example is in Bolivia where a microfinance database has consistently be published for the past twenty years. The database implemented by claudio Gonzalez Vega shows the evolution of interest rates over the years, operational costs and the maturity trends of the sector (Associated Press, 2011). The microfinance sector in this country currently serves more clients in comparison to the corresponding traditional banking sector. The government in the country has never imposed maximum interest rates on microcredit’s and the MFI has ensured that their interest rates to levels similar or lower to those of the commercial banks (Inter-American Bank, 2012). This has resulted to competitive pressure in the microfinancing sector although the sector has not moved away from its social objective of serving its clients. Another challenge is the Challenge of Agent banking (Baumol, 2010). Agent banking was established in an attempt to move the microfinancing services from the branches into the communities. In many cases, this was a strategy to reduce traffic in the microfinancing halls. However, this strategy is new in many of Latin American countries such as Brazil, Peru, and Colombia and its ultimate profitability is yet to be determined (Emerson & Bugg-Levine, 2011). How Women are empowered by Microfinancing in South America Having discussed the nature of microfinancing sector in the Latin American region this paper will now focus specifically on how women are empowered by this program. First, it is important to note that women empowerment can only be achieved by their participation in social and economic development (Auyeung, & Sands, 2010). Political, social and economic awareness is a necessary element of women empowerment. Research show that in the past microfinancing institutions provided direct micro credit services only to women which does not necessarily mean that they were empowered (Kazmin, 2010). Women empowerment is a process that goes far and beyond providing them with direct microcredit’s to start business. It involves helping them to identify their inner potential in business according to this context. Moreover empowering women means that women are helped to establish the market opportunities for growth to the businesses they start with the microcredit’s they receive from the microfinancing institutions. Women should be helped to understand their role in integrating these empowerment definitions so that they can be transformed into an empowered group of people. According to Saraswathy et al. 2010, any definition of women empowerment should include atleast a phsychological characteristic such as the ones mentioned above besides the plain social or economic characteristics (Saraswathy, 2010). This is what the concept of women empowerment entails and the question that emerges is that does the Microfinancing in South America include this factor in their women empowerment mission? (Lee, & Alexander, 2010) According to Feigenberg and Field, E. (2011), they states that in order for women to be empowered they need to have the ability to make strategic choices (Feigenberg & Field, 2011). This ability involves three dimensions namely resources, agency and achievement. In analyzing whether microfinancing in South America is empowering women, it is important to determine whether these dimensions are met by the microfinancing program in the region. This paper follows the definition of women empowerment as defined by Saraswathy 2010. A research by Ministry of Economy and Public Credit and Inter-American Bank was conducted in several South American countries in 2010. The eight empowerment indicators that were used are; economic security, mobility, political involvement, legal awareness, participation in household decision making, and according to descriptive statistical results collected, more than half of this indicators were met (Inter-American Bank, 2012). Conclusion Microfinance increases income of households and employment to the jobless women thereby improving their quality of life. However, microfinance alone has not led to these changes but other women empowerment macro-factors were incorporated. A survey that was conducted by microfinance information exchange in 2010 in Argentina and Cuba involved examining 65 women that had benefited from micro credit. Eight empowerment indicators were used to measure, if after receiving the micro credit, the women were empowered. The first conclusion is that the average level of women empowerment is rising (Ramirez, 2011). This is because more than half of the eight indicators that determine women empowerment were positive. For example, the surveyed showed that more women in the region visited the market without being accompanied. Many women have cash from the microcredit and owns there own businesses. They also have the ability to purchase either in small scale or large scale without the permission of their husbands. Many women cannot be prevented to work outside from the homes and their money or valuable assets cannot be taken away against their will. Another reason is the training lessons provided by microfinancing institutions and agents to women on the region on how they can invest their microcredits wisely (Drayton, & Budinich, 2010). References 1. Inter-American Bank (2012) Microfinance in Latin America and the Caribbean http://www.iadb.org/en/topics/microfinance/microfinance-in-latin-america-and-the-caribbean,1655.html 2. Feigenberg, B. & Field, E. 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