Transformative power of microfinance for women
The women of the world still get the rawest deal. Throughout history, in places where life is tough for everyone, women still on average work for longer hours and take on the burden of the household chores. In its Human Development Report. the United Nations Development Programme reported that 70 percent of the people living on less than $1 dollar (65 pence) per day are women.
Development specialists have known for a long time that increasing the income of women is essential to poverty alleviation. All over the world women have been shown to spend more of their income on their households than men, so that when they are helped, the lot of the whole family is improved.
One of the biggest problems preventing poor women from improving their position is a lack of access to credit. If you are living on two dollars a day this doesn’t mean that you are paid this amount every morning.
One day you might get five, then receive nothing for three days. Income and outgoings are unpredictable; emergencies crop up. The poor need credit more than anyone else – and yet half of Indian rural households are denied formal loans.
That is why micro-finance is so essential – small loans of $20 to $50 dollars a day- have transformed life for many of the poorest. Ever since Muhammad Yunus loaned a Bangladeshi woman $27 to start a business in the mid-seventies, it is estimated that micro-finance has given 100 million people access to financial services.
Microfinancing would never have been a success without women. Investors have found that women’s repayment rates are typically superior to men, which has been essential in making the schemes viable.
Women pay these loans back because their collateral is their reputation: they don’t want to lose face in the community and have fewer options than men. And so a virtuous cycle has continued in which three quarters of those borrowing microloans are women.
Microloans have had advantages way beyond the economic sphere. They have given women greater self-respect, respect from others, and a greater say in the life of their family.
In Rwanda, 69 percent of the women who had borrowed money said that they had increased their self-esteem. In Nepal, women reported that they had a bigger role in areas of family decision-making such as their children’s marriage and sending daughters to school.
And in India, the Working Women’s Forum has encouraged political engagement from those who have joined its micro-finance programme. Nine out of 10 of its members have taken civil action in their neighbourhood over pressing problems.
Microfinancing has proved so spectacularly successful that commercial operators are stealing the brand for themselves. Since the international financial institutions and non-governmental organisations paved the way by proving, against expectations, that the poor would repay their loans, microfinance has been seen as the “next big thing” in the financial world with breathless write-ups in the financial press about the “pin-stripes chasing the poor”.
Unfortunately the ethos of many of the commercial providers is far from that pioneered by Mohammad Yunus. Some lenders charge 80-100 percentinterest to slum dwellers and aggressively sell loans to those who can’t afford them.
In the Indian shantytown of Ramanagaram there have been reports of a “repayment revolt” after the area was “carpet-bombed” with loans from microfinance firms. Yunus has described these activities as no different to “what loan sharks have been doing over the centuries”.
If the brand of microfinancing is to be rescued, it urgently needs some golden rules to which any organization describing itself as a micro-lender must adhere.
There should be group lending so that local traders can guarantee each other and build up a sense of community. Lending should come with training on how to save, business mentoring, and access to some IT technology. And interest rates shouldn’t usually exceed 10 per cent while any profits should be ploughed back into the local area.
There are powerful philanthropists – including Bill Gates and Ebay founder Pierre Omidyar, who have recently entered microfinancing and could lead this effort at drawing up some common standards for lenders. Microfinancing has been a powerful tool for women’s rights. And it is women who suffer most if exploitative lenders are allowed to dress up in micro-financing’s clothes.
Category: Payday loans