Executive summary

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Studies of Women & micro-finance
The situation in New Zealand
Conclusion and Recommendations

 

Despite the progress that women in many countries have made in terms of financial and social equity, there is a continuing discussion on the topic of women and micro-finance and/or micro-credit. One forum for this discussion is APEC, and at the 1st APEC Ministerial Meeting on Women (in Manila in 1998), general concerns about women's access to finance and economic literacy were raised. The meeting recommended that APEC leaders and ministers address the barriers to women's access to finance.

Member countries reported on these issues at the 2nd Ministerial Meeting in September 2002.1 (1 This report is based on information gathered prior to this meeting and should be regarded as a summary of the situation in New Zealand at June 2002. The 2nd Ministerial Meeting addressed the issue of micro-finance in some detail and for this reason mention of it has been made in this update (April, 2003).) Acknowledgment was made at the meeting of the role of micro-finance organisations in enabling women who don't have access to traditional financial services. Recommendations included encouraging the development of commercially based micro-finance institutions, and facilitating the dissemination of information on best practice in terms of micro-enterprise development and financial services for those businesses.

These discussions provided the context for this review, which was commissioned by the Ministry of Women's Affairs in order to better understand the situation for New Zealand women with regard to their access to micro-finance.

The objective of the review was to provide the Ministry with a clear picture of what research has been undertaken on micro-finance to date, to identify the gaps in the 'body of knowledge', and to provide some recommendations on the shape of the project that will follow the review.

This report summarises information that was collected from a variety of sources during the course of the review and makes a number of recommendations, which were based on the researchers' conclusions in relation to what they found.

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STUDIES OF WOMEN & MICRO-FINANCE

The topic of women and micro-finance has been written about from the perspective of a number of different fields of study and/or practice (as shown in the diagram below which is Figure 3 in the body of the report). The dominant perspective has changed over time, with initial studies viewing micro-finance (and/or micro-credit) as a social strategy only (often in the context of poverty alleviation in developing countries). This era was followed by one in which micro-finance was viewed as a potential tool for economic development. Most recently there has been a growing recognition that micro-finance has a role in both economic and social development.

The result of this situation (where the topic of micro-finance has been examined from quite different perspectives) is that it is a field that is lacking a well-defined body of knowledge for practitioners and/or policy-makers. As already noted, much of the early research was done in the context of developing countries, was small-scale and focused on describing what was happening (rather than evaluating its effectiveness). This situation has improved more recently, and while there is still a severe lack of robust research on a number of aspects relating to this topic (e.g. the experience of women and business, the role of micro-finance in women's economic self-determination), there are now some findings that are reasonably widely accepted. (See the section of the report where the literature is discussed for a more complete summary).

• Women tend to have a lower debt capacity since their businesses are often under-capitalised and/or in activities with low profitability.
• Women appear to be more averse to risk and consequently demand fewer, smaller loans.
• Low-income women prefer other types of financing over debt for business purposes.
• Women own less property and consequently are less likely to meet collateral requirements.
• Application procedures can require the co-signature of the husband, which increases transaction costs.
  

In some countries and/or cultures women face socio-cultural constraints.

• Due to their multiple household and economic responsibilities women face serious time constraints and therefore are negatively impacted by transaction costs.
• Women use different sources of information.

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THE SITUATION IN NEW ZEALAND

The researchers gathered information on the situation in New Zealand by identifying relevant printed material (research reports, academic articles and newspaper and magazine articles) as well as by seeking the opinion of individuals involved at a policy or practitioner level with the provision of services related to women and/or micro-finance.

This enabled them to 'map' the New Zealand situation, using a framework developed by the International Labour Office to explore the relationship between policy and practice and the way in which these relate to the needs of the client group. In the context of women and micro-finance, this framework (depicted below and included as Figure 4 in the body of the report) shows that although New Zealand does have a policy framework for the delivery of micro-finance (and/or micro-credit) to women (at least at the international level), there is very little provision, either from the perspective of programmes or from an institutional perspective. Another gap is in terms of the knowledge base about the 'inferred needs' of the women involved: there is very little New Zealand research that is sufficiently recent, robust and comprehensive enough to provide policy guidance.

Institutions

• Virtually no providers
• Low level of delivery dominated by NGOs & membership networks, with a focus on ethical finance (e.g. Prometheus) or women (network of Women's Loan Funds)
• Little current activity by private sector (banks) and/or government departments (though some interest expressed)

Inferred Needs

• Women are highly heterogeneous (therefore difficult to build a picture of their needs)
• Little known about their needs or the value of targeted assistance
• Some new work being done (e.g. MED), but not necessarily focusing on women per se
• Perception that women have difficulty getting small sums of money & obtaining appropriate collateral

Policies

• International policies exist, & NZ is a signatory (e.g. CEDAW, Beijing Platform for Action)
• Weak linkage between policies developed by NZ government agencies & those developed by international agencies (e.g. APEC)

Programmes

• Virtually no programme provision
• Those that are provided are fragmented, not linked to the policy framework & have no basis in research
• Some focus on targeting women in the context of some programmes (e.g. BIZ)

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CONCLUSIONS & RECOMMENDATIONS

The field of women and micro-finance is dominated by practice-based literature (as opposed to literature that reports on the effectiveness of practice from an empirical basis). It is also an immature field; there is too little research that is robust and recent from which to draw conclusions about the best way forward for any country concerned about improving access to finance for women. Partly this is because there is little known about 'access to finance' in general – despite it being one of the issues that is almost always raised in any discussion over the constraints to economic and/or business growth. One of the reasons for this is that it is a topic where the 'real issues' are difficult to tie down; perceptions of barriers, and the barriers themselves are not always the same thing. Another reason for a lack of research that is useful in this context is that women have often been viewed as a minority group in self-employment, or as a group who are disadvantaged. This has led to a focus on micro-finance as a development and/or poverty alleviation strategy, and the majority of literature therefore is set in the context of developing countries.

The situation in New Zealand is even more difficult; while there are a number of agencies that provide micro-finance to women, there is an almost total lack of interest in evaluating whether this is necessary, and whether the particular measures that are being undertaken are effective and/or efficient. While there is little research being undertaken by the delivery agencies themselves, there is also a lack of research being undertaken by the academic community.

The result is that 'what is known' about women and micro-finance in New Zealand is dated, anecdotal and totally insufficient to provide an adequate foundation for any policy development. This gap must be addressed if progress is to be made.

This list of issues may provide some pointers to the Ministry in terms of future work. However, it should be noted that in the course of this review there was no single view on the most appropriate way forward. This was particularly evident in the course of the telephone survey of key respondents: Those who were consulted ranged from having strong views on the urgency of the situation (i.e. they argued that women in New Zealand clearly lack access to micro-finance), to others who felt that the lack of provision was actually an indication of a low level of need.

This divergence of opinion could possibly be due to the varied roles of those interviewed; given New Zealand's small size, the researchers were only able to speak to a small number of individuals who had real experience in the provision of micro-finance to women. While this presented a difficulty to the researchers in this initial review, it could be a real strength of work that follows. The researchers recommend that the starting point of further work should be a forum that harnesses the commitment and knowledge of those who are already working in this field at different levels. This group could provide advice on the development of a project that should attempt to:

• Gain the views of women who want to go into business (nascent business owners) and those that already are self-employed.
• Gain the views of stakeholders in the field (including some of those identified as key informants).
• Link with current research initiatives being undertaken in government agencies (e.g. the Ministry of Economic Development).  
• Link with current delivery initiatives being considered in government agencies (e.g. Te Puni Kokiri, Community Employment Group).

These objectives suggest that further work could have a dual focus. Firstly, there is an urgent need to gather information on the experiences of women in relation to finance in New Zealand. While it may be possible to address this need in conjunction with another government agency, this may prove impractical. A key aspect of this work should be a clear identification of the different groups of women that are potential users of micro-credit and/or micro-finance (e.g. in terms of ethnicity, family context, geographical area) and of their need for the finance (e.g. to support a family and/or to establish a business).

Secondly, the project should identify one or more of the groups identified in the research phase, and develop and deliver a programme that meets the needs of this group (or groups).

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