What microfinance really needs: women's lib

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I saw Muhammad Yunus speak a few years ago, and the thing that struck me most in his speech was his insistence on the power of microfinance to help increase the opportunities available to women. That's why the findings from a recent evaluation of microfinance in Sri Lanka in which female enterprises gained little from access to finance were troubling. A new study discussed in the most recent edition of the FPD Impact newsletter tries to explain why female-owned enterprises have such low returns to capital.

The long and short of it? Finance isn't enough - women need women's lib. The study's authors propose two explanations for why female-owned enterprises saw zero or negative returns to capital:

  • Women tend to work in industries with little prospects for growth and where economies of scale are nil.
  • Women aren't free to invest in their business in ways that maximize profits because other members of their household may try to appropriate resources. That is, women tend to overinvest in illiquid assets like equipment and underinvest in more liquid assets like inventory.

How to fix this? David McKenzie, the author of the newsletter (and one of the authors of the study) points out that you could "include messages and activities to increase empowerment among women" as part of microfinance services. But why not go a step further? If women aren't free to make the most of their skills and available capital, isn't it high time to make women's lib part of the PSD agenda?


Ryan Hahn

Operations Officer

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