One of the long-standing priorities of the international community is to reduce gender disparity in developing countries. Yet, the overall picture is still gloomy: women continue to be excluded from access to resources and employment and are denied basic human rights. This Policy Brief explains why progress has been so minimal and what should be done about it. Recent Development Centre research (Morrisson and Jutting, 2004, 2005; Morrisson and Friedrich, 2004) has shown the institutional framework as key to understanding the economic role of women in developing countries, yet this framework has not received the attention it deserves. This Policy Brief summarises the lessons from this and other research to answer three questions. First, why are social institutions so important for gender equality? Second, what obstacles impede reforms of discriminatory social institutions, and why is progress so limited? Third, what policy lessons emerge for donors? Feminist studies emphasised the major role of institutions for gender inequality early and repeatedly (Elson, 1991; Marchand and Parpart, 1995; Parpart, 1993). They argued that patriarchal structures perpetuate gender inequality. To overcome it, women must challenge existing power relations and change or abolish patriarchal institutions. A landmark World Bank study on gender equality (2001) also puts priority on the need to reform institutions to establish equal rights and opportunities for women and men. Within the overall institutional setting, social institutions and cultural practices -- i.e. laws, norms, traditions and codes of conduct -- often are the main sources of persisting discrimination against women in developing countries. Examples include polygamy, unequal inheritance rights, obstacles to free movement and early, family-imposed marriages of teenagers. Where traditions still largely determine people's behaviour, standard policies to promote gender equality -- building more schools, giving micro-credit to women and so on -- are important but not sufficient. Building schools where custom or tradition forbids girls to leave the house alone after puberty will not make much difference. Giving micro-credit to women in rural villages where they are denied access to land, technology and information will not deliver the desired effects. Finding options to address unfavourable institutional frameworks presents a tremendous challenge. Quick fixes or blueprints of reforms will not work and could be counter-productive. Donor intervention in social institutions is particularly difficult, because they are highly sensitive and action could easily be viewed as "cultural imperialism". The Human Development Report 2004 addresses the definition of cultural liberty and how it relates to social institutions. "... [N]either cultural freedom nor respect for diversity should be confused with the defence of tradition. Cultural liberty is the ability of people to live and be what they choose, with adequate opportunity to consider other options" (UNDP, 2004, p. 4). Promoting change in social institutions is not a step against cultural liberty but allows women to make their own decisions. Promoting gender equality and the empowerment of women is not a western view imposed on developing countries. All 191 member states of the UN unanimously adopted it in the United Nations Development Declaration (Millennium Development Goal Three). (A bibliography is included. Contains 1 footnote, 3 figures and 1 box.)