BEYOND CREDIT ACCESS: MICROFINANCE, WOMEN’S EMPOWERMENT, AND THE LIMITS OF POVERTY REDUCTION IN RURAL GAMBIA

Abstract

This paper analyses how microfinance affects the economic outcomes, empowerment of women and poverty alleviation in rural Gambia. Although microfinance has been popularly advocated as a means of financial inclusion and poverty reduction, there are new indications that the impacts are usually heterogeneous and situation-specific. This paper is based on financial intermediation theory, capability approach, and empowerment theory, which allow the researcher to use a multidimensional approach to the effectiveness of microfinance when measuring it as compared to traditional income-based approaches.The study uses Ordinary Least Squares (OLS) regression models to assess the relationship between microfinance participation and major outcomes, such as income, savings and various measures of empowerment using primary data gathered on 50 beneficiary women of a microfinance institution based on the North Bank Region of the Gambia. The results show that the participation in microfinance is positively related to the income improvement and savings accrual, economic and social empowerment. But these are mostly incremental effects, which are not reflected in the overall poverty reduction. Besides, the findings indicate minimal effect on political empowerment and indicate that the microfinance programs are likely to serve those already engaged in economic activities as opposed to the poorest population.The research adds value to the body of literature by proving that microfinance is more of a livelihood support and financial stabilization mechanism and not a revolutionary poverty alleviation instrument. It also reveals that the success of microfinance is influenced by the design of the institutions and combinations of complementary services and inclusive targeting policies. The implications of the findings on policy makers and practitioners interested in improving the developmental effect of microfinance in low-income situations are significant.