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| | Microcredit and Women's Empowerment
By Stacey Cordeiro 22/01/2004 At 09:34 report back from a WSF workshop Here are my notes from another workshop I don't really have time to synthesize the information here, I can only really type up what I have.
OK but here's some background. Microcredit programs grew out of a finding maybe in the 1980s that poor women were having a hard time getting access to credit with which they could start small businesses. The economic development world decided that providing very small loans to poor women would be a good poverty reduction strategy, and since then, there has been an explosion in these microcredit programs all over the world.
Speaker: Alfonso Castillo from Mexico
Critical Issues in Microenterprise:
1. Homogenization of models - needs of people all over the world are very diverse, yet development agencies are applying a cookie-cutter solution.
2. Devaluation of the group focus - originally, microcredit programs lent money to groups of women, who were then collectively responsible for paying it back. The social pressure made it more likely for the loan to be paid back. Now loans are going to individual women.
3. Concentrating on financial issues rather than health and social issues - you can't just throw money at poverty and expect it to go away.
4. Most places are only giving loans for production (starting a business). His organization makes loans for whatever women need to buy.
5. The state has taken on its own microfinance strategy. The state is not worried about justice and empowerment, only about giving credit to poor people to turn them into better consumers.
Another danger is the secondary role of savings in microfinance. Extending credit is a form of dominance, a way to control others. Savings is a way of doing something for yourself. At his institution (sorry, don't know what this is), 80% of customers are savers, 20% borrowers.
The facilitatator (Soma K.P. from an organization called Nirantur) added: Banks want savings groups to be homogeneous across caste and tribe. But women are trying to build bridges over these divisions - this prevents them.
Speaker: Norma Sanchez, Argentina
Microcredit became very popular in Latin America in the 1990s as a strategy against structural adjustment policies. Accion International (based in the US) works in 16 countris in Latin America - minimum loan is $100, average is $680 - short term loans have 30% interest rates. 65% of beneficiaries are women.
The emphasis of these programs is on the sustainability of the program, so they build in high overhead costs. Development agencies target women for these loans because they believe women will spend the money better, and that it is harder for them to get mainstream loans.
The most notable of these banks if Banco Sol (I think) in Bolivia, which is also the biggest bank in the country. 70% of clients are women, mostly street vendors and small restaurants. They also have savings accounts.
Microcredit is supposedly closing an inequality created by a gap in the market. Rates on these loans are market rate or higher - they can reach 40 to 50% annually. The assumption being made is that benefitting the family will also benefit the woman personally.
Fallacies on which this strategy is based:
- Equal participation along gender lines
- The programs equal empowerment
- They neglect the balance of power between men and women - men often decide on the use of the money even though it's in the woman's name
- Doesn't take into account the reproductive work of women (see my earlier post on Feminist Economics and Globalization)
- Doesn't consider broader supports, like technical assistance and business planning needed for women to turn the loan into a profitable business
Women are not saying that credit is a priority for them. The obligation of debt is leading them to self-exploitation (they are working too hard to pay back the loans) and greater stress. Women need more equal power relations in families and a more equitable division of labor.
From 1989 to 1992 she ran an initiative that had a low interest rate and built in training with a gender perspective, including women's empowerment, entrepreneurial training, division of household work between men and women, domestic violence, solidarity among women, and marketing support. This program didn't fit with structural adjustment policies and was cancelled.
Soma: Women are saying these programs are making more work for them. They have homework to do and are rushing around to meetings. There is no longer the demand for microcredit that there (maybe?) once was.
Selita from Uruguay
She has 13 + years as an organizer and educator. Currently, the coordinator of a popular education network and Latin America and the Caribbean which includes 140 NGOs, activist and professional women. Their mission is to advocate for social and gender justice. One of their programs is a lifelong learning economics course, where they talk a lot about microcredit, although they don't have a position on it up or down.
Maybe people in some countries need loans equivalent to US $ 30-50, but in Latin America, this is sometimes so small, it's disrespecful to offer. (What's microcredit varies from country to country.) They believe women don't need microcredit, they just need credit. "We deserve big things".
Women are also having a hard time with the bureaucracy involved - they get frustrated and confused when they have to fill out multiple forms and visit multiple counter to do their banking. Women have work in the home, work outside of the home, education and training programs, and now microcredit. This is just adding one more thing to their lists of obligations.
Microcredit is one part of micro-enterprisethe most important part is education for the right to exercise our rights. Women need to do advocacy for public policies - at local and bigger levels. Need for women to have experiences locally and globally and balance the two.
Soma: they have done a study on microcredit. Some of the points:
- Only 30% of banks have given loans to savings groups more than 2 years old (see my post on SEWA for explanation of savings groups). This means the bank is sitting on 70% of this money, revolving it out and making more money on it. They should be using it for development purposes.
- Literate women tend to be leaders in credit & savings groups, but organizations are not doing literacy training. 50% of those going for training are already literate, when only 30% of women overall are literate.
Srilatha (I think from Andra Pradesh in India)
She's working with a filmmaker on this subject
The complex of myths:
- Microcredit started as a feminist demand because of lack of access to credit. Has since become a silver bullet - single strategy used politically to pacify a poor constituency without addressing the root cause of marginalization, the disparity in power and resources.
Experience in AP
The Chief Minister (he calls himself the CEO) of AP launched a restructuring policy in 1999 - sent a message to his administrators to target rural womens groups for aid. He equated these with "the poor" and "the community". They have now identified every village women's group in 20 districts, and have gone in and done education on gender roles. Aid is supposed to go to groups, but they ended up making loans to individuals. This is called District Poverty Initiatives.
More of what's happening and its impact on women:
- pressure to distribute more and more loans - some have taken up to 4 loans. They are working more hours to pay them back.
- Girl children are working more at home.
- None of these loans translate into profits more than the equivalent of the minimum wage.
- SOme women are suffering with multiple loans but are being highlighted as success stories.
- Effects on men - now they are having trouble getting loans!
- Effects on gender relations - women handling money leads to resentment from men. Women are working so much they don't have the time to address their relationship problems.
Big themes:
- the reduction of citizenship of women to instruments of rural poverty alleviation
- every little village in S. Asia now has one of these microcredit programs....
OK sorry I have to go and will keep typing this later (maybe be a couple of days, stay tuned)
>>Add a comment
Micro-credit has become a panacea for poverty worldwide, from the paddy fields of Bangladesh to the urban sprawl of Los Angeles. It is also politically fashionable.
The greatest pioneer of micro-credit, Muhammed Yunus, the founder of Bangladesh’s multi-billion dollar Grameen Bank, has a guru-like celebrity following rivalling that of the Dalai Lama. His idea of lending small amounts of money to poor people, mostly women, to enable them to set up micro-enterprises has won plaudits across the world. It is the stated intention of donor organisations and leading NGOs to extend credit to 100 million poor households world-wide in the next few years. But this paradigm of development is based on a simplistic, destructive neo-liberal philosophy.
In his drive to expand micro-credit, Yunus dispensed with notions of job-creation and education as the focus of development and instead has concentrated on trying to enable the poor to pull themselves out of poverty. In the Grameen model, instead of relying on collateral to secure loans, credit is secured by peer groups, which are required to ensure that no member defaults on repayments. Consequently, micro-credit is a dream come true for donors and non-governmental organisations (NGOs). Repayment rates are well above the banking sector norm, while at the same time, loans are invested in pre-existing survival skills, enabling the poorest to be magically transformed into entrepreneurs. That way, micro-credit’s supporters claim, lending to the poor shows that capitalism can benefit all, not just the rich.
However, the rapid expansion of credit to the poor fails to address the structural causes of poverty and often increases the vulnerability of the poor. The problem inherent in micro-credit is that progress is predominantly measured in terms of the number of participants, money saved, repayment rates and other easily quantifiable factors. The end result in terms of qualitative poverty alleviation has taken a back seat in the drive for micro-credit growth, while the dubious practices adopted by some lenders are ignored.
The 90-95 per cent repayment rates boasted by the Grameen Bank come at the cost of heightened conflicts within families and communities. Aggressive recovery tactics employed by debt collectors in micro-credit schemes have included stripping tin roofs off the homes of indebted households who are unable to meet their payments. NGOs involved in micro-credit are acting less like agents for economic development and more like loan sharks. For instance, in Bangladesh, micro-credit schemes often charge borrowers up to 40 per cent interest – a rate that is far higher than market rates.
The effectiveness of micro-credit in permanently alleviating poverty is also doubtful. Where credit actually improves the productive capacity of micro-entrepreneurs, the sustainability of their operations is not guaranteed. In the developing world, market forces and macro-economic policies profoundly affect cottage industries, which find it hard to compete with mass-produced products. Globalisation has exposed poor countries to a harsh, highly competitive environment in which small producers have been crushed. So it seems baffling to encourage poor people to engage in informal economic activities, such as milk production or handicrafts, which are increasingly under threat from larger, more efficient producers owing to liberalisation.
So why is micro-credit becoming more fashionable among development practitioners? Governments, NGOs and donors have failed to deliver the necessary investment in development and micro-credit conveniently shifts the responsibility to the poor. It is no surprise that Bangladesh has been the focus of this strategy. Bangladesh is one of the world’s most corrupt states and suffers from almost complete infrastructural breakdown, so it is cheaper and less risky for donors to put their money into micro-credit.
Yet, the notion that millions of impoverished people can magic themselves out of poverty, without stable prices and exposed to the harsh winds of global markets, is simply insane. Yunus’ micro-credit mythology needs to be blown apart and replaced by global redistribution of wealth if the poor have any chance of long-lasting relief from poverty.
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Srilatha says it would be very easy to measure what effect these microcredit programs are having on the overall quality of life for poor women. You don't have to come up with any fancy measure, just use something simple like the sex ratio in the place, survival rate for girl children, female literacy, etc. If these measures are not improving with the microcredit programs, the question should be, why are there not improvements in gender relations?
At the South Asian social forum, they also asked, how are these groups dealing with the rise of fundamentalism? Why did the massacre happen in Gujarat, which is one of the places with lots of these programs?
Microcredit is the easiest way to start a women's group, but these activities absorb all the time of the group, so they can't become tools for greater empowerment.
Speaker: Deepa, the filmmaker
In addition to NGOs and then governments, even multinationals are getting interested in these women's groups. They want to use them to access the hard to reach rural market. Some have done market surveys through the women's groups to learn how much disposable family income people had on a daily basis. They found out the daily surplus income was about 1 or 2 rupees, so they started packaging their products in these sizes so poor rural people would be more likely to buy them. Some groups have even been approached to start doing Amway distribution. (!!!)
Speaker: Lalipen, a women's group leader from Rajasthan. Her group has been under pressure to take a loan. She is in a single women's federation and works for Integrated Child Development Services. ICD's administration is pressuring the women who work there to form savings and credit groups, open accounts with banks, and take out loans. She wants to know why they are being pressured this way.
Speaker: Mangu (don't know from where). She was in a group where the women didn't want to contribute to the savings, so the group leader put in all the money herself. When the loan came, she used all the money herself and had to pay it back.
Comments from the audience:
? from India - Government functionaries are under pressure from the higher-ups and the banks. Banks are desperate to give away loans. These groups are being misused for lending purposes.
Gilga from Hydrabad, works for World WOmen's Banking, one of the Ideal Partner success stories (of the world bank?). Says women used to have a hard time getting loans, now are being forced into them. FOr each group she hands over to ICIC (??) she gets 8000 rupees.
Kelenai (I am probably not spelling most of these names right) from Andra Pradesh - what is the women's movement doing about this?
Woman from the northeast near Tibet: sometimes the cost of transport to the bank is greater than the amount of the deposit! She has heard of loans with interest up to 480% a year!
Sunita: Women are saying that they feel like the tap through which water flows, but the tap itself doesn't drink. They deliver money to the family, but don't benefit from it themselves.
We need a political vision, and it needs to come from not only the women's movement, but the broader progressive movement.
OK, that's the end of the notes. My comments:
It's hard to say why this is happening. The person who responded above gave some good background. I would also add that, practitioners in the field of economic development are so desperate for effective strategies, that when they identify a real need (like lack of access to credit which I'm sure was and is a real need in some places) and a successful solution, they latch on to it. Mostly because it's so seldom that they (we) come across such a clear need and simple solution. The main message from everything above is to not over-apply the solution. Don't assume that the needs are the same everywhere, and don't apply cookie cutter solutions that don't fit the local environment.
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