Does promoting entrepreneurial activity undermine women’s empowerment?

By Sabina Rogers
Communications and Relationships Manager

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I recently read an article on the website for the Wharton School (U Penn) from January of this year that is rather startling. The article describes an unpublished report by Wharton management professor Tyler Wry and Eric Yanfei Zhao from the University of Alberta School of Business. Using data from the MIX (1,800 MFIs in 168 countries), Wry and Zhao conduct an analysis of policies that have been promoted to create the right environment, the “stable infrastructure,” for MFIs to flourish. (Full disclosure, I have not yet read the report.)

Their conclusion?

“We found that countries that do have more liberalized markets, including increased flow of capital and thus the ability to make more loans, also [can] support a lot more microfinance activity, which is good,” Wry says. “But we also found that these same factors that would make a country attractive to MFIs also made it less likely that they would lend to women.”

The article summarizes it this way: “‘While increased foreign investment, low taxes and supportive regulations may create a [positive] environment for MFIs in some regards, this mainly applies to those MFIs that ‘emphasize financial sustainability over social outreach [my emphasis],’ the authors write. In other words, while foreign investors may say they want to promote better lifestyles for women and families, they also expect positive financial returns.”

But why is this? Once the conditions are right for businesses and investment is flowing in, do MFIs lose the drive to create social good through lending to women? Is it a case of financial success distracting them from their social mission? Or are the MFIs that attract private capital not interested in women’s empowerment regardless of investor priorities? This is left unanswered by the article. I would be interested to learn—if the data allows such analysis or conclusions—whether MFIs that started with a social mission succumb to the pressure for investor returns or financial institutions enter the market (maybe calling themselves MFIs) that really have little or no interest in creating social benefits.

The article does explain that “studies have shown that MFIs that focus on lending to women ‘are less likely to be financially self-sustainable and [are] more reliant on government subsidies than their commercially oriented counterparts.’”

Not very attractive to all those private sector investors, is it? Indeed in our recent publication, Vulnerability: The State of the Microcredit Summit Campaign Report, 2013, we posited 10 reasons to explain why the global microfinance market shrunk in 2011 (see our data). Reason #2 was

Misaligned incentives—The market provides few rewards to those MFIs that reach poorer and more remote clients [who are typically women] because reaching these clients usually entails higher costs and smaller margins. Without ways of recognizing those that reach the poorest, MFIs will have few incentives to extend to this market and will find it difficult to attract funding to do so.

Unsurprisingly, when private capital focuses on the return for the investor rather than the return for the microfinance client, women tend to be “pushed away from the microfinance market,” according to the report, and “the bottom line is that if you take steps to promote entrepreneurial activity, it has a counterproductive effect in countries where you most need MFIs to reach out with loans to women [my emphasis].”

To a great extent, blame for this can be ascribed to patriarchal systems, which limit or forbid women an education and the inheritance of property. One direct result of this for microfinance is that there are fewer female employees who could provide role models for the clients and with whom the clients would feel more comfortable interacting–especially in countries where the degree of patriarchy is higher.

“Patriarchy, Wry says, really changes the outcome when you look at both the economic and cultural factors. ‘You need to consider both sides of the equation. Patriarchy may be changing the nature of microfinance in many countries. You are seeing an accelerated drift away from serving women. A lot more MFIs are doing a lot less good.’”

My bottom line is that the report and the article discussing it reveal that while “investors may say they want to promote better lifestyles for women and families” they are clearly not yet investing (enough) in MFIs that are working to do so. The task that lies ahead is to complement the increased attention to the social performance practices of MFIs (and pressure for them to comply) with measures to change the performance paradigm for investors. Hugh Sinclair’s book points to this gaping hole in a very pointed manner.

What We Can Do
How, then, do we as members of the industry—and advocates for microfinance that has a positive benefit in clients’ lives—convince investors to halt the “drift away from serving women” and begin investing in MFIs that are doing a lot more good?

It starts with commitment, a commitment by both investors and MFIs to engage in specific and measureable actions that support doing a lot more good.

We at the Campaign are advocating for an increase in investments in MFIs with verifiable social performance results as well as for an increase in the number of women clients in an MFI’s portfolio (especially women living below the $1.25/day threshold). This is what we are dedicated to supporting: building a framework for supporting a global movement of members of the whole microfinance ecosystem to answer just these kinds of problems. We hope you’ll join us.

Read the full article on Knowledge@Wharton for more.

2 thoughts on “Does promoting entrepreneurial activity undermine women’s empowerment?

  1. Studies of entrepreneurship in The Economist that my family has been involved with since 1972 when my father pointed the genre entrepreneurial revolution show a lot of confusion. Your title replicates this. One of the greatest innovations of the original Bangladeshi microcredits is that they designed microentrepreneurial franchises around women. That is income generation services where the banker had designed both the market’s value chain and the knowledge needed for hard workers to be continuously rewarded producers -so there was practically no market risk being born by the member. The simplest example is brac’s redesign of the poultry market. It bred a chicken that could lay several tomes more eggs so making more than a living wage for villagers who kept the newly franchised chicken breed, but it also created jobs round chicken feed, distribution and para-vet job positions. Over 100000 jobs of 5 different specified types all fitting into one whole value chain designed so that the producers sustained economic returns from their microfranchise positions..I calculate that of the 15+ million members of BRAC and Grameen in Bangladesh, the majority work for microfranchises. In other words, microentrepreneurship minimises the risk to purposeful villag members working lives being rewarded as one would hope from banks owned in trust by and for such communities of parents

    If you want to know about the hi-trust innovation of the microfranchise please join in at When Dr Yunus talks about how to free youth with a best job creating university being free and online, training modules on how to replicate the microfranchises of the real pro-poor and pro-youth investment banks of microcredit become urgent to feature so millions of youth can test them out. And entrepreneur can reclaim its socially sustainable origins as the french word was coined to map from 1800.

  2. Je n’arrive pas à avance par défaut de la langue. Moi je suis francophone de la RDC.


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