Microfinance

masters microfinance

Lore Vandewalle and Martina Viarengo

The focus of the research area is on issues broadly related to microfinance. These are the themes under study:

Self-Help Groups

Self-Help Groups (SHGs) are informal associations of 10 to 20 rural poor women. They save on a weekly basis, so members can pool their resources, create a group fund and give out small loans to one another. In a later stage, they open savings accounts in commercial banks and apply for bank loans. The main research questions are whether traditionally disadvantaged villagers, such as members of lower castes or landless farmers, perform well in these groups and on potential non-financial benefits of microfinance.

Socio-Economic Impact of Microfinance

The role of microfinance in the fight against poverty has gained special prominence in recent years. Governments, international organizations and NGOs have adopted microfinance as an anti-poverty strategy to help reach the Millennium Development Goals. Microfinance institutions have expanded significantly in the past twenty years, and have done so by increasingly targeting women. The rationale is that women’s increased access to financial resources is not only a way to reduce gender inequality, but also is a way to promote women’s empowerment and reduce poverty. But rigorous empirical evidence on the impact

of microfinance is limited, and what there is shows mixed results. There is a lack of comprehensive and consistent evidence on whether access to microfinance allows women to indeed have a greater control over the resources they earn, and whether they are indeed more empowered within the household. Knowledge about the impact on income and consumption also is scanty. Understanding whether microcredit really advances women’s social and economic empowerment and leads to welfare gains for their families is key for economic development in many poorer countries.

Financial Literacy and Access to Financial Services

Financial literacy skills are of paramount importance for low income individuals in developing countries who have limited resources and restricted access to credit. The existence of these budget constraints reflect the lack of financial autonomy and can thus lead to undertake investment choices in training and education that are very different from those they would have done in the absence of such constraints. Yet there is increasing evidence from several developing countries that low income individuals have a very limited understanding of basic financial concepts. Financial literacy programmes are relatively new. An increasing number of organizations and NGOs now run financial training programmes. The evidence on their effectiveness so far has been mixed.

Source: graduateinstitute.ch

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