Microfinance and Female Empowerment
This paper investigates the necessary and sufficient conditions for microfinance to nurture the empowerment of women for adoption of high productivity activities. The paper uses a game theoretic model to highlight factors that hinder a female entrepreneur's access to high productivity informal activities with the following assumptions:
- Womens' entrepreneurship is assisted by microfinance institutions (MFI) that provide loan and training to all their clients;
- Female entrepreneurs jointly choose the type of business activity.
It draws evidence from the following literature that most women receiving loans from MFIs tend to be confined to low productivity activities:
- Case study of Bangladesh by Kabeer;
- Lairap Fonderson case study of Cameroon and Kenya;
- Case study of Zimbabwe by Gibbon.
The paper describes the game theoretic model studying gender based transactions costs with respect to female entrepreneurice of:
- Business size;
- Degree of productivity of the business venture.
It also discusses the activity choice game providing women entrepreneur choice between two types of informal activities low and high productivity. Using two pure strategies, the paper demonstrates the activity choice game:
- Pareto ranked;
- Symmetric Nash equilibrium.
- It concludes that based on the results of the game, women tend to elect to operate in high productivity business ventures.
Finally, the paper states that for MFIs to succeed in nurturing female empowerment, women's access to credit must be conditioned to their adoption of high-productivity informal activities.
