SUMMARY - Federations:
An Empowering Approach to Micro-credit Delivery

By Duncan MacVicar (Jul, 2004)

http://www.sspindia.org/pdf/Duncan_FM%20Credit.pdf

Abstract

This presentation presents an argument to bring back development goals into microfinance by highlighting the differences between the federation model and the traditional micro-credit approach.  It describes the federation model (or Credit for Empowerment) as one that allows women to organize, train and develop themselves around credit, while the traditional one is only a credit-delivery tool.

The key points highlighted in the presentation are:

The federations model is focused on empowering women to modify local development.  Its structure puts women development in the center. 

By participating at any of the three levels of the federation, they are responsible for governance decisions as well as administrative processes.

Women benefit from building their own capacities as well as from the mobilization of their own funds and resources, which promote economic development, independence and sustainability.

Financial institutions also benefit from the federation model, since it eases bank linkages and holds audited accounts and computerized databases

Summary

Traditional micro-credit and the federations approach have different objectives: The traditional model aims to deliver credit to those excluded from the formal sector, while the federation model‚Äôs objective is to organize women, particularly around credit and to build capacities to manage money.  Additionally, the traditional one sees women‚Äôs groups only as vehicles of credit, while federations promote peer-to-peer learning and capacity building among women.

The federation’s structure consists of three levels:

Governing Body

Cluster Committee

Savings and Credit Group

The cluster committee and governing body are democratically elected from the savings and credit group members and have monitoring and advocacy responsibilities, such as developing linkages with governments and financial institutions.

The governing body is registered as an NGO and thus can access external funding.  It also has a trained auditing team.

These activities allow women to change traditional notions about women and build on their own capabilities and confidence.  Moreover, they get to mobilize their funds and resources to meet their needs.