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Microfinance and Gender Empowerment Image

Promoting Inclusive Markets and Financial Systems

Microfinance and Gender Empowerment

Microfinance and Gender Empowerment


This paper provides a perspective on the theory underlying gender targeting in microcredit programs and its possible effect on intra-household relations.

The paper proposes a model of household bargaining which examines how providing women with credit affects their production and decision-making power in the household. It accounts for the roles of divorce and non-cooperation in the household as relevant fall-back options in the bargaining strategy of each spouse. The paper demonstrates that:

Microcredit programs are likely to have widely heterogeneous impacts, and can adversely affect the bargaining power of some women;
Impact of any type of intervention depends critically on whether or not divorce is a credible threat point;
Availability of credit is most likely to strengthen women's bargaining position in the household when capital can be invested in a cooperative activity where both spouses contribute.
Finally, access to credit allows a woman to strengthen her bargaining position only when she is able to invest her new capital profitably in an autonomous activity, and when, simultaneously, her husband has no alternative activity in which the same capital would generate comparable returns.

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