Microfinance

Micro-lenders are not established merely through the need of poor people, but by the decision-making of donors who first identify a social or developmental objective.

Some lenders specifically target microcredit at women. Women are usually seen as economically less independent than men in the same social group, and benefits from their economic empowerment are argued to extend more directly to their children. Therefore, women are often seen as more desirable lenders, from a social equity point of view, than men, and there is a large number of microlenders who explicitly aim at women empowerment.

Another important group is young people. Alternative target groups may comprise rural people, because they are seen as unable to benefit from development and employment creation in cities and towns. Finally, other social criteria for selecting a target group may be factors such as ethnicity or nationality, or factors of social disadvantage like a physical disability.

 Targeting specific sections of the population has not only social but also economic implications. There are two sides to it: first, different groups may be variably efficient in utilising micro-loans in creating viable enterprises, and second, different groups typically have different repayment patterns, thus impacting on the sustainability of microlenders.



A clear distinction between various groups of microlenders: those who provide a business service in an infant industry situation, and thus focus on economic viability, and those who see themselves as a comprehensive development and empowerment agency, and thus emphasise social change. With appropriate arguments, both approaches can be justified. However, many donors and microlenders hold on to unreasonably optimistic hopes of being able to combine the best of business mindedness and charity and compassion. Therefore, donors as well as lenders evade some hard choices; this may explain why many microcredit schemes promise to deliver on conflicting objectives.