Author: Emma Kench, University of Sydney
Nepal has experienced significant macro-economic growth throughout recent years, illustrated in the expansion of its annual GDP growth rate from 0.6% in 2016 to 6.7% in 2018. However, inequality in wealth distribution remains a significant bar to achieving human rights for all Nepali citizens. Statistics demonstrate that the poorest 20% of Nepal‘s rural communities access only 5% of the GDP. Inadequate income-generating opportunities in rural areas, combined with a lack of infrastructure, means that the anti-deprivation impact of the growth is insignificant. This is compounded by the fact that access to formal finance is extremely difficult for the rural, with 18% of the population completely excluded from financial services. Micro-finance institutions with a strong focus on microenterprise development are currently being utilised to combat this issue, with a specific focus on women who have traditionally been marginalised and denied business opportunities. This example illustrates how the private sector thus has the potential to better the lives of marginalised groups, supporting individuals to take charge of their own economic development to achieve the fulfilment of human rights for themselves and their communities.
Microfinance institutions (MFIs) target poor individuals traditionally excluded from the formal credit market in order to pursue combined goals of economic growth and social outreach. They provide a wide variety of financial services, from micro-credit loans to savings and checking accounts, insurance and payment systems. In Nepal, the microfinance market consists of a variety of institutions, ranging from small non-profit organisations to privately-owned development banks. An advantage of private MFIs, such as Nirdhan Utthan Laghubitta Bittiya Sanstha, is that they are able to access a broader range of funding sources, in order to expand their financial outreach sustainably. Furthermore, MFIs often supplement their operations with the provision of non-financial services, such as skills-enhancement training and entrepreneurship development programmes. This improves the success of MFIs in achieving long-term poverty alleviation, by arming recipients with the tools to invest their microcredit into their own economic development. For example, access to these funds by the private sector has directly supported marginalised groups to pursue microenterprise, advancing the betterment of their own lives through creating long-term, sustainable sources of income.
Unsurprisingly, prevailing cultural prejudices have perpetuated a situation where women are disproportionately represented amongst the poor. Women in Nepal are more likely than men to be constrained in their access to credit, as well as assets, education and basic health facilities. Even within the same market, female entrepreneurs are considerably disadvantaged in terms of access to credit, equipment, raw materials and training, compared to their male counterparts. Therefore, it is more difficult for women to lift themselves out of the state of deprivation and achieve the fulfilment of their most basic human rights. Microenterprise development programmes are being utilised to combat gender inequality, with a specific focus on women’s empowerment to alleviate poverty at a grass-roots level. Often referred to as a “self-help development model“, it utilises the existing capability of individuals to generate self-employment, local jobs and wealth.
In Nepal, the success of the ‘Microenterprise Development Programme’ (MEDEP) illustrates how private sector-driven development can be utilised to provide a strategic, long-term solution to achieving socio-economic transformation. MEDEP targets 70% females in rural poor communities, facilitating access to microfinance and supporting the establishment of microenterprise by (i) providing skills and business training to set up microenterprise; (ii) linking microentrepreneurs with larger industry through systematic subcontracting; and (iii) capacitating private sector organisations to provide business development services to microentrepreneurs to link their products with regional and national markets. This has resulted in increased opportunities for marginalised individuals to contribute to their own economic development, illustrating how improving access to larger private-sector growth can result in a number of positive human rights impacts.
Microenterprise development has been successfully shown to contribute to the fulfilment of the economic, social and cultural rights of marginalised women. Survey findings reveal that 54% of women experienced a higher weekly cash flow, leading to substantial improvements in both household and family conditions. Food quality and variety have improved in 70% of cases. In comparison, health care for women entrepreneurs and their family members improved in 28% of cases. Furthermore, the financial empowerment of women is critical to the economic development of the entire community. Not only are women lower credit-risks than men, but are also more likely to reinvest their income into family needs such as housing, clothing and educating their children. Education is essential to breaking the cycle of poverty, demonstrating how the betterment of women’s lives today will have a long-lasting impact on the achievement of human rights for the generations to follow.
Furthermore, microenterprise development has been shown to have a significant impact on the fulfilment of women’s civil and political rights. By empowering women financially, they are also empowered socially through increased participation in decision-making processes. Regular group meetings and skills workshops become forums for women to discuss gender-related issues. Increased confidence strengthens the capacity of women to raise their voice and become agents of political change. This is reflected in the fact that women who participate in MFIs and microenterprise development in Nepal are more likely to be active within their local public institutions and political parties.
In conclusion, the microfinance movement in Nepal illustrates how the private sector can play a critical role in advancing the betterment of the lives of poor, marginalised communities. Through providing rural women with access to financial services, in conjunction with skills-based training and support, they are able to alleviate themselves from poverty with the establishment of microenterprise. This demonstrates how private sector-driven development can be used as a powerful tool for the achievement of fundamental human rights with long-term, sustainable outcomes.