day 20 - women and microfinance

Yesterday we discussed the economic potential of microfinance, ending with a discussion of how such a loan can improve the lives of women, their families, and their communities.

 

Mohammed Yunus, founder of Grameen Bank (a microfinance loan group in Bangladesh) recognized the especial impact such microloans had on women. Not only could these women become entrepreneurs; they could also return the investment to their communities. Grassroots organization ONE estimates that women invest 90% of their income in their families and communities, compared to about 30-40% for men (possible explanations for this include tendencies for men to spend money on short-term investments, as opposed to women’s investments in the education and health of her family). Most of Grameen Bank’s loans are to women, and according to the Bank’s website, loan repayment rates average between 95-98%.

As discussed yesterday, women that become owners of successful microfinance businesses may have a more sustainable income (as opposed to income that is dependent on the success of a harvest). Women that receive a small loan can purchase materials to make handicrafts, start a small store, or buy animals to sell in the market. In areas in which women have traditionally been marginalized, they gain more respect from their husbands and communities for becoming an economic leader. (This is a crucial step in allowing women more participation in government – women that become leaders by transforming their community’s economy are more likely to be allowed to serve on a government council.)

For its numerous positive aspects, microfinance has its cons: Sometimes, no matter how hard an entrepreneur may work, their business does not succeed. This may be due to basic principles of supply and demand (her village may be in a severe economic state, in which families are unable to afford anything except basic necessities). According to Kristof’s Half the Sky, microfinance loans unfortunately usually come with high interest rates that can quickly accumulate if the business is unable to successfully start.

Yet the success of microfinance businesses owned by women is overwhelming (we’ll look at some case studies in the upcoming days), and the economic returns sizeable: the Organization for Economic Co-operation and Development estimates that “Limited education and employment opportunities for women in Africa reduce annual per capita growth by 0.8%. Had this growth taken place, Africa’s economies would have doubled over the past 30 years.” Microfinance institutions provide one way to improve economic, social, and gender equality in rural Africa, allowing women to send their children to school.

Janna