Banking on Her: The Effects of Microfinance on Women’s Autonomy in Developing Economies

Once applauded as a way to empower the world’s poorest, and in particular benefit women, the practice of microfinance is now perceived with a much more cautious and nuanced lens. Some perspectives state that microfinance improves women’s lives and uplifts communities, while others claim that it increases over-indebtedness and does not provide a viable path to escape poverty. In order to determine if microfinance is an effective use of resources to empower women, this paper analyzes the relationship between women’s autonomy and microfinance to provide further insight into its proposed positive and negative effects. Using ordinary least squares regression analysis, the study analyzes data from 45 different developing countries using data from the World Bank and the United Nations. Autonomy is operationalized in a variety of ways to test for robustness, such as female secondary school enrollment, women participating in decision-making, and female unemployment and labor force participation rates. Findings show that microfinance has little positive effect, if any, on women’s autonomy, with the percent of female borrowers being the only significant microfinance-related influence. Even then, this variable only affects female secondary school enrollment and the poverty headcount ratio. This study contributes to the body of literature focusing on women’s empowerment and microfinance to help determine future policy approaches