Aniket Dave

Ms. McMennamy
Period 5
1 November 2016
Timed Writing #3
Modern microfinance, developed by the Grameen Bank in 1983, relies on specific
lending patterns that maximise repayment rates in such a money-tight market. Every step is taken
to find the specific types of people who are able to best repay loans. Through many studies since,
it has been found that women are generally more responsible borrowers than men. A
foundational idea of modern microfinance is targeting female clients -- it has proven to be highly
successful around the world due to its economic, social, and cultural impacts.
In the 1980s, the Grameen Bank found that women generally take out smaller loans and
pay more reliably -- this inspired many MFIs to lend disproportionately to women because it
proves greater financial security and empowers women in heavily patriarchal third world
countries. Even with repeated proof that Women have proved to be better savers and also loan
repayers than men in many contexts (Genfinance), the Grameen Bank tried its best to lend
equally to men and women. Despite these efforts, women make up about 95% of the banks loans
(Armendariz & Morduch). Its a result of natural market forces acting even in third world
economies. Unlike Grameen, many MFIs cater exclusively to women. These organizations often
contribute full financial assistance, such as with health care because health contributes heavily to
the success of female borrowers. So what exactly makes women better borrowers than men?
They are generally more careful with their money, taking out small loans and paying them on
time in order to avoid accumulated interest. Men are more prone to taking out big loans and big

risks. In third world countries, women are often subjugated to men socially. They are not trusted
to work outside the home. With an inherent fear that they will be punished for losing the family
money, women take the extra step to be careful with loans.
Poor societies are often economically restrictive towards women, but since microfinance
emphasizes womens financial independence, they are given more control over income; on top of
that, they become more involved in local economies, giving the latter more room to grow. As
was established before, women have higher repayment rates and are more responsible with their
familys money. This prevents small economies from becoming too dependent on debt, which
could easily spiral out of control in small economies. MFIs and small banks benefit in a smaller,
but still important way. Promoting women's rights and socio cultural development through
finance improves their brand image. Financial institutions are always regarded with suspicion
and mistrust -- both in poor areas and around the world. Their ability to conduct business is
limited in the current environment of mistrust and scepticism about the financial sector
(Genfinance). As their part in improving the situation of women becomes apparent, they will be
able to expand businesses and help more communities in good standing with the governments
under which they operate. Women are allowed to work, as they are the ones in charge of money.
Aside from making defining breakthroughs in women's rights, workforce participation is good
for burgeoning economies. When women are more invested in markets, the size of the towns
market essentially doubles. With more participation, cash flow and volume increases, and so
business investment is heightened.
With greater workforce participation, women are given higher value in the household and
community, access to information and opportunities for growth, and wider experience of the
world outside their restricted circles. Most countries in which microfinance in implemented are

traditionally patriarchal countries. Women are expected to stay home, take care of the kids and
the house, and cook. Men are the sole breadwinners of the family. Lending to women gives them
an opportunity to control household money. More responsibility means more trust and
confidence. It allows women to demonstrate to males that they are capable of contributing to the
household income, therefore enhancing [social] perceptions of women's contribution to
household income and family welfare (Mayoux). This gives them the confidence to begin
advocating for their socio cultural rights. They contribute to their homes and to society, which
convinces men that they have earned their rights. Women are also able to network through their
trade, experiencing the world outside their otherwise small group of friends.
The model of lending to women, although not exclusively, is in theory and in practice
massively beneficial. Their responsibility with money makes them trustworthy borrowers.
Lending to women kills two birds with one stone: poverty is alleviated in poor areas, and women
are given more responsibility and therefore, respect.

Works Cited

Armendariz, Beatriz, and Jonathan Morduch. The Economics of Microfinance. Cambridge, MA:
MIT, 2005. 1-56. Print.

Bateman, Milford (2010). Why Doesn't Microfinance Work?. Zed Books.

Mayoux, Linda. "Genfinance." FinancialServices. GenFinance, n.d. Web. 28 Oct. 2016.

Mayoux, Linda. "The Magic Ingredient? Microfinance & Women's Empowerment." The Magic
Ingredient? Microfinance & Women's Empowerment. Micro Credit Summit, 1997. Web.
28 Oct. 2016.

"Small Change, Big Changes: Women and Microfinance." Multiple Meanings of Money: How
Women See Microfinance (n.d.): 26-67. International Labour Office. International Labour
Office. Web. 28 Oct. 2016.