Pioneering microcredit for women in remote Pakistan
An IFAD-funded project in the Dir district has pioneered a new approach to rural financing that conforms to Islamic regulations. In its initial phase it has helped women set up micro-enterprises. In just nine years it has demonstrated how economic and social empowerment can transform women’s status and self-esteem.
Microcredit can provide a much-needed boost to people’s earning power in remote parts of Pakistan. But the hurdles can be substantial, given the social and religious customs that curb lending practices.
The Dir district in the North-West Province of Pakistan is a remote mountainous and disadvantaged area. It is also culturally conservative, and women's roles and mobility are limited by rigorous customs and traditions. Strict Islamic prohibitions against interest-based lending are observed by many communities, to the extent that the formal banking sector has shied away from lending here. Development interventions need to be sensitive to religious and cultural values.
The IFAD-funded Dir Area Support Project, closed in 2006, used a new system - Islamic Banking or Islamic Finance - to make microcredit available to borrowers in a way that is compatible with Islamic regulations. The system makes the lender an active, risk-sharing partner in the enterprise, who not only advances credit but also provides training in relevant topics, such as basic accounting and marketing. The project began by introducing the Islamic microcredit system to members of women’s organizations.
"I am very happy," says Roheeda Bibi, who belongs to a women's organization in Gujurabad. "My family was very poor. We lived in a house made of mud. Thanks to the project, I've earned enough to build a proper cement house and buy furniture and a stove. Now that I've learned how to run a business, I have hope for a better future."
With a disabled husband and six children, Roheeda is the only breadwinner in the family. Her daily wage as a housemaid, Rs. 50 – about US$0.75 – was not enough to feed the family. Through the project she obtained a loan of Rs. 20,000 (US$303) to buy a cow. She sold milk at Rs.100 (US$1.5) every day, and two calves for RS.18,000 (US$273). Not only was she able to repay the loan within the stipulated year, but she has also gone on to consolidate her small dairy farm little by little. Now she owns two cows and two calves.
For the women participating in the project the tangible and immediate benefits have been considerable. Like Roheeda, Bacha Khela from the Shaikh Ahid women's organization is supporting an older, unwell husband and five children. With a loan of Rs. 15,000 (US$227) she managed to set up a grocery shop in her own house. Bacha repaid the loan within a year and now earns a net income of Rs. 2,500 to 3,000 per month (US$38-45). She has also started selling clothes. With the money she has made she was able to marry her daughters and now plans to buy a house and find a bride for one of her sons.
"Before I joined the women's organization I had no hope of having my own income," Bacha said. "Now I have my own business and my life has improved. I have bought a stove and a refrigerator. My goal
now is to buy my own house and pay for my other children's education."
For those benefiting from the project's initiatives, acquiring assets and the ability to run a small business have made all the difference to women's self esteem and sense of autonomy. "My cow is my asset, just like my gold jewellery", says Imtiaz Begum who purchased a cow through the project, "My husband cannot sell it because it belongs to me."
Another woman, Shakila from the Camp Colony WO in Dir has started a business selling clothes. She was struggling to feed and clothe her large family on her husband's daily wage of Rs. 80-100 (US$1.2-1.5).
"I learned about the women's organization through a neighbour. At the time I had four children and none were in school because we couldn't afford it," says Shakila. "After joining the women's organization, the project helped me borrow Rs.10,000 (US$151.5) to start my own clothes business. I usually buy clothes from the local market and then sell them in the village." Shakila offers a valuable service to local women. Instead of asking male family members to buy their clothes for them, they can now buy directly from Shakila in her home. "Women usually don’t like the clothes that men select for them," She says.
Two years ago Shakila repaid the loan and continues her business. Her current stock is worth Rs. 30,000 (US$454.5) while her net income is from Rs. 3,000 to 4,000 per month (US$45-60).
Without the acceptance and encouragement of the male community, this kind of progress would be impossible. Shakila's husband, she says, is happy about her contributions to the family income and her efforts to lift the family out of poverty.
Younger women have also learned skills and acquired capital enabling them to support an entire family. Razia belongs to a women's organization called Bandai Kwowar that was set up by the project. When her father fell sick and was unable to work, Razia, the oldest child, had to take care of the family.
She took part in a two-week vocational training in embroidery arranged by the project. The project also provided her with Rs. 10,000 (US$151.5), enough to buy 30 shawls and other material to begin embroidering. By selling each shawl for Rs. 400 (US$6) she earns Rs. 250 (US$4). Now she is not only repaying her loan, but also making a profit. It is extremely rare for a Pakistani woman to support her family. Razia, like these other women in Dir, feels important and empowered.
The women's organizations have gone from strength to strength. They provide a much-needed forum for women to discuss their problems, as well as an opportunity for members to socialize and support each other. In some organizations women are lending small amounts informally amongst themselves, while others have gone further and set up their own bank.
"We save regularly in our meetings," says one illiterate member of a women's organization. "Now that we have learned how to use our savings, we will keep saving and give credit to the members at a low interest rate to cover operational costs."
With excellent repayment rates and positive responses from the women who have taken part, this successful project will soon be extended to male borrowers.
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