Rise of Microfinance, Rise of Women: A Report

At Women’s World banking we believe lending to women is a more efficient way to end poverty. Decades ago, the pioneering microfinance institutions sought to provide credit to poor entrepreneurs who had been denied access by the formal banking sector because they had no assets to pledge as collateral. It quickly emerged that female entrepreneurs invested the profits from their businesses in ways that would have a longer-lasting, more profound impact on the lives of their families and communities.

WWB’s research confirms that the key economic priorities for poor women – to a far greater extent than for men – continue to be healthcare, the education of their children, and housing. The woman entrepreneur as the gateway to household security became a fundamental premise of the microfinance business model and the success of microfinance as a poverty-alleviation tool.

Our three decades of working globally with poor women empirically shows that access to financial services has a notable impact on the lives of women and their families and also on their own sense of empowerment by changing their status within their home and communities.

Every day we see examples such as Joyce Wafukho, a microfinance client in Kenya, a mother of five supporting her family because she was able to access credit. In 1994 Joyce saw a need for a retail hardware store in her farming community in western Kenya. She invested her entire savings to buy a small amount of inventory and opened a hardware store in a rented storefront. However, her plans for a fully stocked hardware store were hampered by lack of investment capital, and initially she was able to sell only tomatoes and charcoal. Joyce contacted numerous banks seeking loans to expand her business, but her loan applications were denied or simply ignored. Finally, after years of rejection by creditors, Joyce heard about Kenya Women Finance Trust (KWFT). Joining other women in her area, Joyce received training from KWFT in accounting, simple bookkeeping, and leadership.

In April 2004 she received her first loan from KWFT for 50,000 Kenya shillings (sh), or $680. Since then, Joyce has received, and promptly repaid, five loan installments from KWFT, for a total of sh 1.2 million (or $16,500). Joyce currently employs twenty-five full-time workers, including her husband. Joyce’s business has enabled her to build a permanent home for her family and provide her children and siblings with better nutrition, healthcare, and education.

It is critical to understand that this kind of change does indeed take time. Our research shows it takes a minimum of three loan cycles – a minimum of three years – to see evidence of these changes. In many countries, change might not occur until the fourth or fifth loan cycle. The changes themselves are often small and very gradual – making a home improvement from a mud floor to one of wood, or from a cardboard roof to metal, or the ability to keep a girl in school for another year instead of ending her education so that she can work to help support the family.

Microfinance brings about other important changes. Evidence suggests, for instance, a distinct decrease in domestic violence against women if we can help them get listed on a property title. One of our members conducted research in southern India that showed a rate of household violence of 49 percent among married women who did not own either a piece of land or a home. For women who owned land, the incidence of violence dropped to 18 percent; for women who owned a home, 10 percent. The ownership of property also offers women the option of leaving an abusive environment.

It is clear from our research that credit alone is not a sufficient tool to change lives. We talk about “financial services,” not just credit. Access to products and services beyond enterprise credit for growing a business is vital. The poor, particularly women, need access throughout their lives to the same array of financial services, including savings and insurance, that anyone else does.

By now, microfinance has grown to include nearly 2,000 institutions reporting more than $44 billion in gross loan portfolio. We are not arguing that microfinance will solve all the world’s problems. It does, however, provide an opportunity for some of the three billion people who live below the poverty line to have access to credit to start businesses, savings accounts, and protect their assets – all of which can change lives.

Adapted from a report provided by Women’s World Banking, based in New York. A global network of forty microfinance providers and banks working in twenty-eight countries to bring financial services and information to low-income entrepreneurs. The network serves more than twenty-four million clients, primarily women. (see www.swwb.org)