Women Benefit From Microcredit Lending as Do Small Lenders: Big Payback

http://www.cbc.ca/news/background/economy/microcredit.html


Microcredit lending: Small loans; big payback


CBS News (Nov. 10, 2006)


While not a strict requirement, the reality is that most of the loan programs are targeted to women. The Microcredit Summit Campaign says it's found that women are more likely to repay their loans in full and are more likely to use the money to improve their families' lives. They are, in the words of the Grameen Bank, "the best poverty fighters."


...A 2005 progress report noted that more than 66 million poor families had been helped as of the end of 2004, representing more than 330 million people. The summit campaign believes the 100-million goal will be reached by the end of 2006 or 2007.


Microcredit lending is now carried out by more than 3,200 organizations in dozens of countries in Africa, Asia, and Latin America. The longest-running microlending enterprise — that of Grameen Bank — has loaned $6 billion US to 6.6 million borrowers in more than 71,000 Bangladeshi villages since 1976 (96 per cent of the clients are women).


... What is microcredit?

The Microcredit Summit of 1997 defined microcredit as any program that extends small loans to very poor people for self-employment projects that generate income. Definitions of what constitutes a "small loan" may vary from one country to the next, but many of the loans are as small as the equivalent of $30. Most loans are under $200.

A typical loan might see a woman borrow $50 to buy chickens. The chickens would produce eggs and, eventually, more chickens — all of which she could sell in the marketplace. Every week, she and other local loan recipients will gather to make loan payments — tiny weekly installments that makes repayment much easier for the borrower. The clients also share success stories. Peer support is an integral part of the microfinance system. The loan will be fully repaid in six to 12 months and the money will then be re-lent to someone else in the community.

The loans are usually fronted by non-profit groups that are typically owned by the borrowers themselves. One becomes an owner simply by borrowing. The loans granted by microfinance institutions (MFIs) usually carry an annual interest rate of 15 to 35 per cent (although some loans are interest-free). That may seem high to Western borrowers, but it reflects the high costs they face in running their programs and meeting every week with their clients in the clients' home villages. For most of the borrowers, the only alternative to a microloan is the local moneylender and interest rates that can quadruple the cost of a loan in just one year.

MFIs also don't just loan money. They also offer entrepreneurship and life-skills training, such as literacy and nutrition counselling.

...What are the lending criteria?

The typical recipient of a microloan is very poor. They struggle to survive every day, often living on less than the equivalent of $1 US a day.

Unlike other types of loans, microcredit loans never require collateral. Being desperately poor is all it takes to qualify. Formal contracts are usually not drawn up. The loans are based on the premise that credit is a human right and that everyone has skills that can be harnessed. Even beggars can get loans.

"Conventional banks look at what has already been acquired by a person," Yunus wrote. "Grameen looks at the potential that is waiting to be unleashed."

Lending to Women Makes Good Business Sense -- and Lifts Up Whole Communities

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1218


Published: July 27, 2005 in Knowledge@Wharton


Attending a conference on women's health and safety at the global level, one might expect to hear reports from doctors and scientists talking about new technologies and medications to address specific health issues. If only it were that simple. Instead, participants at the recent "Penn Summit: Safe Womanhood in an Unsafe World," organized by the Schools of Nursing and Medicine, heard a complex story of poverty, illiteracy, limited access to the formal economy and inadequate property rights -- some of the conditions that most directly affect women's health and their ability to care for themselves and their families. It is among these seemingly ancillary problems, said Summit speakers, that we will find solutions to the greatest health challenges facing women today.


Poverty and Illiteracy: A Lethal Combination


When asked to pinpoint the most detrimental causes of ill health among women, speaker May Rihani, director of the Global Learning Group and Center for Gender Equity, Academy for Educational Development, said that without doubt it is the combination of illiteracy and poverty. As such, said Rihani, "girls' education at the primary and secondary level might just be the most powerful strategy to improve the socioeconomic environments in which women live, and improve the health of women and their families." She provided the audience with statistics from numerous studies that linked education to better health:


• A 63-country study showed that higher education levels for women increased productive farming and accounted for 43% of the decline in malnutrition achieved between 1970 and 1995.

• In Africa, children of mothers who receive five years of primary education are 45% more likely to live beyond the age of 5.

• Multi-country data show that educated mothers are about 50% more likely to immunize their children than uneducated mothers.


She also presented statistics that show the effects of illiteracy and lack of education:


• Countries with lower than 20% of girls enrolled in secondary school have the highest rates of teen birth rates.

• A study from Zambia finds that AIDS spreads twice as fast among undereducated girls.

• A study in Brazil shows that illiterate women have an average of 6 children, while literate women have an average of 2.5.


Lack of education, coupled with poverty, sets up a secondary problem - that of women being forced to seek financial stability through unsafe means. Geeta Rao Gupta, president of the International Center for Research on Women, told Summit participants that the asset gap, particularly with land ownership, places women in extremely precarious financial situations.


Statistics of land ownership among women in many countries, she reported, is dismally low. In Brazil, just 11% of women own land; in Pakistan that figure is only 3%. "The asset gap pushes women into the informal sector," said Rao Gupta. "This means insecure, low-paying jobs -- the kind of work that is not protected by laws or governments." By far the greatest threat, agreed participants, is the often inevitable slide into prostitution.


"Far from being the oldest profession in the world," said speaker Esohe Aghatise, executive director of Associazione Iroko Onlus, a group in Italy that addresses human trafficking, "prostitution is the oldest form of oppression in the world." Laura Lederer, a senior advisor with the U.S. State Department, said that their research has uncovered numerous health issues associated with women involved in the sex trade: 64% had been threatened by a weapon, 80% had substance abuse problems, and 68% suffered from post-traumatic stress disorder.


Ameporn Ratinthorn, a member of the nursing faculty at Siriraj Mahidol University in Thailand, has worked directly with prostitutes. She reported that among nearly all of the prostitutes she spoke with during a recent research study, economic instability and lack of education were the two key factors leading women to the sex trade. The portrait of a prostitute, at least in the area of Thailand where Ratinthorn conducted her research, is that of a woman with little education (65% had less than six years of formal education), who is a mother (60% have children), is the sole bread winner in the family (if there is a husband, he tends to be absent), is in debt, and whose family has at least one member who is sick and unable to work.


What these women tend to have in common, said Ratinthorn, is that they are highly economically disadvantaged and at the same time have enormous family responsibilities. Not surprisingly, the women in Ratinthorn's study suffered from high rates of sexually transmitted diseases, including HIV/AIDS, and had suffered physical injury and even death due to violence by customers, partners, pimps, and even law enforcement personnel.


Opening Doors to Wealth Generation


While women are often kept out of the formal economy, they have proven -- when given a chance -- to be highly adept at improving their financial situations and in turn, the well-being of their families.


This fact was the catalyst for the creation of microfinance organizations more than 20 years ago. As C. K. Prahalad notes in his book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, "Women are central to the entire development process. They are also at the vanguard of social transformation." He attributes the success of Grameen Bank, a microfinance pioneer in Bangladesh, to its policy of lending only to women. Indeed, the default rate at the Grameen Bank is less than 1.5%.


Speaker Hans Dellien, manager of microlending services for Women's World Banking, said that investing in women "is a secure bet." And the connection to women's health is clear. "If you empower women through economic means, they will invest in their children (by sending them to school) and in their households. Good health follows."


WWB's web site answers the question of "Why lend to women?" this way:


• Women are major actors in the global economy. Women's roles as the farmers, traders, and informal sector industrialists are major and often overlooked.


• Global experience with microlending demonstrates that women are better credit risks than men, and that low-income entrepreneurs have higher repayment rates than large bank clients.


• Investing in low-income women entrepreneurs is a highly efficient means to achieve economic and social objectives. Women manage household finances in most of the developing world. As more cash and assets get into the hands of women, most of these earnings are spent on food, medicine and schoolbooks for their children.


• Women tend to be honest, practical and reliable. This results in a low percentage of business failures and loan defaults among women business owners.


Dellien said that he and his colleagues within WWB, which doesn't lend money but serves as an advocate and provides technical assistance for microfinance, spend a lot of time explaining to banks and potential lenders that this isn't charity, but rather a highly effective, smart way to invest resources.


That idea is at the core of Prahalad's book, which notes that more than 4 billion people live at the bottom of the pyramid on less than $2 per day. Rather than pity them or treat them like "poor" people, imagine what we could do if we involve and respect them by opening doors to financial stability, suggests the author. This kind of limited thinking -- that poor people are all the same -- held back even microfinancing organizations, added Dellien. "Twenty years ago we had a one-product-fits-all approach." Groups like his eventually began to see that their clients, though all poor, had very different situations.


"Our clients were running small, medium, and large enterprises," he said, "which means they had different financing needs." That realization has led to a variety of new products and services, which Dellien hopes will soon include health insurance and pension funds. By recognizing the power at the bottom of the pyramid, microfinancing organizations have moved their focus from just helping women subsist to helping them (and in turn, their families) create long-term financial stability.


As Judith Rodin, past president of Penn and current president of the Rockefeller Foundation, said in her welcoming remarks at the Summit, "This is a multidisciplinary problem .... Education and employment affect women's health." That theme played out during the two-day summit where participants heard over and over that a woman's economic position directly affects her ability to pay for needed improvements in health, housing and education; impacts her power and status in the family and community; and plays a major role in her ability to act against violence directed toward herself and her family.

Protecting Women's Property and Land Rights to Protect Families in AIDS-affected Communities

http://www.fao.org/newsroom/en/news/2004/38247/index.html


International Women's Day 2004 Focuses on Women and HIV/AIDS


Food and Agricultural Organization (FAO) Rome


March 8, 2004


Protecting the property and land tenure rights of women in AIDS-ravaged parts of Africa is vital to prevent rural households slipping into a spiral of poverty.


Losing land or property can unravel the whole fabric of a family, limiting access to safe, inexpensive and nutritious food and forcing children out of school and into employment.


"Family and community structures crumble in the wake of HIV/AIDS. Already facing poverty, the needs of many households become more acute and assets -- like land, property and tools -- become critical resources," says Marcella Villarreal, AIDS focal point at FAO.


In Namibia and Uganda, for example, where land law and property rights are made up of a complex system of overlapping official and traditional law, the rights of women to inherit, own and manage land can fall through the cracks.



Widespread illiteracy and a lack of access to formal court systems, lawyers and other legal resources can make matters worse. FAO is working with local authorities and communities to guarantee that women's rights are protected, by ensuring they have access to sources that explain their rights and the means to defend them.


For many women in AIDS-affected households, losing a husband is the first of many losses she will face. She risks being thrown off her farm, perhaps her only source of income and security, by relatives and robbed of her assets.


A recent FAO study found that over 40 percent of widows had lost cattle and tools, seized by relatives after the male head of household had died.


"HIV/AIDS can tip the balance into poverty," Villarreal adds. "The phenomenon we are witnessing in countries like Namibia, where women widowed and children orphaned by HIV/AIDS are stripped of property and the right to own and farm land, could spread further."


When women lack title to land or housing they have to face a narrower choice of economic options. They may have to deal with homelessness, poverty and violence, contributing both to their and their children's impoverishment. Poverty can also encourage high-risk behaviour such as engaging in unsafe sex for money, housing, food or education.


FAO is working with the Namibian Ministry of Women Affairs and Child-Welfare and the Legal Assistance Centre to raise awareness in rural communities of women's rights and how they can be protected by the law.


About three-quarter's of Namibia's 1.83 million people live in rural areas, and AIDS is the leading cause of death in the country, accounting for 28 percent of all deaths each year.


As a result of this FAO-assisted project, traditional leaders, church leaders, councillors and senior figures in the community are made aware of how land-grabbing can affect families already struggling to cope after the loss of a member to HIV/AIDS.


Volunteers are trained to be able to inform women on how to write a will so that their intent is legally expressed and followed after their death, thereby protecting their children's future. They are also taught about inheritance rights and women's rights in relevant legislation such as the Married Persons Equality Act.


For a woman, owning land or understanding her legal rights over a piece of land she farms also has environmental benefits. Women with secure land tenure are more likely to invest in their land than those without legal land rights, through irrigation, for example, or by farming in a more sustainable manner rather than for short-term gain. According to a recent World Bank report, increased land tenure security increases the value of the land and can greatly increase poor people's wealth, in some cases doubling it