The Impact of Microfinance on Women and Economic Development: A Client Study

October 7, 2010

Microfinance is the provision of basic financial services to the poor. Access to loans, savings and insurance helps poor entrepreneurs to create and grow small businesses. Initially, microfinance was largely gender neutral: it sought to provide credit to the poor who had no assets to pledge as collateral. It quickly emerged, however, that women invested their business profits in ways that would have a longer-lasting impact on their families and communities. Consequently women became fundamental to the success of the microfinance model as a poverty alleviation tool.

The commercialization of microfinance and more recently the media have challenged microfinance’s impact. In response, WWB commissioned Accenture Development Partnerships (ADP) in 2009 to conduct a study with two WWB microfinance partners: Muthoot Fincorp Ltd in India and Fundación Mundo Mujer (FMM) Popayán in Colombia, to understand how clients of these two vastly different institutions use their loans. The Study showed that small business loans do nurture investments, foster growth and create additional jobs in the community. The Study also found that women tend to make more positive improvements to their businesses after receiving a loan than men, and reinvest more of their earnings into their families.

We present five key messages from the study here, giving both anecdotal and data-driven evidence of the power of microfinance, especially in the hands of women.

Note: The map in the publication mistakenly marked Venezuela as one of the countries the study was performed in, instead of Colombia. We apologize for any inconvenience this may cause.Download the English version