The Effects of Human Rights on the Success of Microcredit Lending Institutions

Abstract

This study explores the relationship between human rights and the success of microfinance institutions (MFIs). Microfinance emphasizes the empowerment of women, yet no study has examined whether the existing human rights environment, or the rights environment for women specifically, helps or hinders the effectiveness of this grassroots development approach. We test competing hypotheses, including the possibility that the rights environment affects MFI success, the possibility of an inverse relationship between levels of women's political or economic oppression and MFI success, and the expectation of no relationship. Our quantitative analysis of MFIs in the Opportunity International Network suggests that the overall human rights environment in which they operate has significant effects on repayment rates, while women's economic rights affect the operational self-sufficiency of MFIs. This has important implications for our understanding of the factors that make microfinance institutions viable, and for the degree of access that underserved communities have to credit.