eThesis - Kauppakorkeakoulun sähköiset gradut

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The importance of access to credit in terms of development is well recognized, as is the overrepresentation of women in the poorest segments of the third world societies. The purpose of this thesis is to study the institutional differences in provision of credit to women in developing countries.

The financial sector in developing countries can be divided into formal, semiformal and informal financial institutions. For a number of reasons culminated in information asymmetries, women are assumed to be more excluded from formal financial services than men. On the other hand, they are also considered an important force driving the economic and social development in their countries. This is why many semiformal, mainly microfinance institutions (MFI), have decided to focus on female clients - alongside reasons related to MFI efficiency. Furthermore, while targeted by semi-formal institutions, it is also believed women have a higher tendency to participate in communal forms of informal finance. Based on these notions, it could be thus assumed that there are significant institutional differences in women?s access to credit in developing countries.

However, recent studies show the situation in a different light. Not all agree poor women are more excluded from financial services than men, and many have questioned the developmental as well as efficiency based arguments of semi-formal institutions? gender agenda. In fact, the researchers today already talk of a “second generation” of microfinance institutions, who regard focusing on female clients as both inefficient and ineffective. Meanwhile, many formal financial institutions have become more aware of the unbanked population, and informal finance has been suggested as a viable alternative to traditional provision of financial services. The institutional differences begin to blur.

In this thesis I try to answer the question to what extent there are differences in the supply of credit to women by formal, semiformal and informal financial institutions, and why these differences may exist. I base my research on a literature review of the fundamental theories of credit market functioning and recent research in the field. In addition, I will perform an empirical analysis of a case country, Uganda.

While the literature review suggests financial institutions in developing countries differ in their provision of credit to women, the results of the empirical study conducted for this thesis indicated no significant difference in female access to formal or informal finance. They did however show a pro-female bias in the semiformal financial institutions? provision of credit, and also provided evidence for institutional differences in credit provision unrelated to the gender variable. The findings could be thus interpreted as a confirmation of gender agenda of the MFI as well as the often-cited challenges in measuring access to financial services. Many consider defining financial access per se as problematic. Nevertheless, this should be not seen as to undermine the importance of the field of female financial access in terms of social and economic development.