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The “Women-Only” Approach Versus the “Family Empowerment Approach”: Egypt as a Case-Study

March 7th, 2011

The access to basic financial services that Islamic Microfinance offers empowers Muslim women in giving them a new dimension in life and feeling of self-worth. However, while this ability of Microfinance to provide rural women with micro-loans in gender-segregated societies is laudable, working with Muslim women in particular raises the issue of interfering with social, cultural and religious codes. The Qur’an encourages men and women to play their respective roles in society, by ensuring the economic and social wellbeing of the family: “Men shall have a share of that which they have earned, and women a share of which they have earned” (Qur’an, VI, 32).

Hence, the “women-only” approach typical of conventional microfinance is not always followed by Islamic Microfinance Institutions (IMFIs) that try to adhere to Islamic principles and values while providing customers with loans. IMFIs overcome this problem by shifting their focus from “women empowerment” to “family empowerment”, which is also promoted by the Qur’an. While this kind of an approach might be met by criticism, it must be understood that it is a very culture-specific approach that mostly caters to male-dominated societies.

The “women-only” approach does weaken the institution of the family by sending both the male and the female out to work, giving them both the feeling of being the breadwinner for their family. But besides this, this approach is also prone to many risks posed by traditional male-dominated societies. In these societies, the funds provided to women for investment in their enterprises are often usurped by the male members of the family, while the women consequently end up carrying the burden of repayment and of their business independently.

In a Muslim country like Egypt, which was the first MENA country to sign the UN Convention on the Elimination of All Forms of Discrimination against Women (CEDAW), Microfinance has had a great impact on women’s empowerment in the country. In 2008, a national survey carried out by Planet Finance (NGO) evaluated the impact of microcredit as well as the perception of this impact: “During the focus group discussions, women unanimously stated that the loan had had a positive effect in terms of their image in their communities; they are also more self-confident and their children appreciate what they do. Their projects have allowed them to have a better life in general (“National Impact Survey” 86)”. Despite being a male-dominated Muslim society, Islamic Microfinance accentuates women empowerment.

47 percent of Egypt’s microentrepreneurs are women; 88 percent of these women operate home-based businesses and only 28 percent operate non home-based businesses. Despite these circumstances wherein women are allowed to realize their entrepreneurial skills and abilities out of their home, 45 percent of women have noticed a positive change in their life, in terms of education and economic possibilities, whereas 86 percent of women have experienced a positive impact in terms of personal autonomy (V. COSTA – H. MAKHLOUF – P. MAZAUD).

Sources:

Costa, Valentina. Makhlouf, Hala. Mazaud, Perrine. “Women’s Empowerment through Islamic Microfinance in Egypt”. MESCI 2009-2010.

What Does It Mean For Women To Be “Empowered” And Does Empowerment Compromise The Viability of Microfinance Institutions Worldwide?

March 3rd, 2011

Microfinance has had a positive impact on the status of women globally. What does it mean for women to be “empowered”?

According to the State of the Microcredit Summit Campaign 2001 Report, 14.2 million of the world’s poorest women how have access to financial services through bank, Microfinance Institutions (MFIs), NGOs, and other such institutions. These women belong to the 74 percent of the approximately 20 million of the world’s poorest people that are now being catered to by MFIs. This means that most of these women have access to the ‘loan’ they need to start or invest in their own enterprise; also, most of these women have great repayment records despite the financial problems they run into on a regular basis. So then, is it a good idea to lend money to the poor, and more specifically to poor women? What does this money do for them in terms of their ‘empowerment’?

The word empowerment is difficult to define precisely; yet, it is easy to pin-point an example of empowerment when we see one:

Snapshots of Empowerment:

  • Nury, an illiterate Trust Bank client at AGAPE in Colombia, formerly too shy to speak to strangers, became the treasurer for her Trust Bank.
  • A group of widows in Bali received loans from WKP to start simple projects raising pigs. Over time, they grew in confidence and solidarity and expanded to form a pig-feed cooperative that became the major supplier for their village.
  • Hanufa, a member of CODEC in Bangladesh, defends her rights against an illegal divorce but ultimately decides that she is better off on her own. “I can walk on my own shoes now.”

A lot of different terms have been associated with empowerment: self-reliance, self-respect, self-enabling to reach potential, development of self-worth, and so forth. Empowerment is definitely the goal of many MFIs worldwide; these institutions help women that have previously experienced little or no power, make choices that impact their lives forever. By providing these women with basic financial services, and a loan to become an entrepreneur, they have a tremendous impact on this empowerment process.

Even though MFIs with a strong focus on empowerment have been criticized to have lose their operational viability and sustainability in the process, this has been proved wrong by many MFIs with the same women-empowerment focus. Working Women’s Forum (WWF) in India, for example, is fully financially sustainable and offers a range of nonfinancial services, including organizing women in the informal sector to achieve better wages and working conditions. WWF also empowers poor women through its institutional structure by training them to act as health promoters and credit officers in their neighborhoods. Therefore, MFIs with a strong focus on empowerment maintain very high levels of operational and financial sustainability, suggesting that a great deal can be done to enhance women’s empowerment even within the constraints of financial sustainability.

To the Politicians of Andhra Purdesh: Give (Regulated) Microfinance a Chance

March 3rd, 2011

To the Politicians of Andhra Purdesh:

My name is Kevin Webb, and through the course of the past quarter studying women’s health internationally in general and microfinance’s impact on the wellbeing of women in particular, I have come to believe that microfinance as a whole still has a tremendous capacity for positive impact. I understand many of your frustrations with the industry—it is poorly regulated, it targets your least powerful and least educated citizens, and it has helped put an entirely new class of people into debt. Worse, even where it fails the people it is purported to help, microfinance is still uncritically viewed in the West as a finance-based means of combatting poverty.

Indeed, following Muhammad Yunus’s Nobel Prize in 1997 for his pioneering of microfinance with his Grameen Bank, microfinance has seemed like something of a panacea back in the US. Kiva.org has become a household name, and celebrities here from Bill Clinton to Natalie Portman (http://www.takepart.com/news/2008/03/07/natalie-portman-loves-kiva) have hailed its work. I myself donated $25 to an enterprising group of women in Sierra Leone who are trying to expand their baking business (http://www.kiva.org/lend/264387), and felt connected to this group of women in doing so. Should I recoup the investment, I’ll be able to give a little more the next time around.

To well-intentioned philanthropists, microfinance is a clean way to provide resources to people who need just a small amount to get themselves off their feet. This investment’s impact is enhanced by the interest rate charged, because it means any funds recouped can be reinvested in other people in need of help. More intangibly, the nature of American microloan aggregators like Kiva and MicroPlace make it so users can create seemingly personal connections with people they otherwise would never meet. That’s a potent emotional force for good, if harnessed properly.

As you are aware, this past November, politicians in your state implemented a wealth of drastic new measures designed to limit microfinance’s impact. At the time, there was good reason: where many microfinance organizations were continuing to operate quietly and ethically, others had taken advantage of good will toward the industry and begun to foment a cycle of debt for your state’s most impoverished. Banks have long done this with the middle class, but until microfinance, the world’s poorest have been seen as too high risk to warrant interest. Once Grameen and other organizations demonstrated that money and interest could be recouped, though, it became clear to some very cynical people that the poor were an enormous new segment of people to exploit financially. There are stories of people being hounded, day after day, to repay loans, and others of poorly educated farmers being convinced to take three, four, or even more loans simultaneously. 75 of your citizens took their own lives in response to their mounting debt. Let me be perfectly clear: these business practices are completely reprehensible, and you were absolutely correct in calling attention to them.

But the line you drew in the sand worked. In some senses, it worked too well—even the ethically minded organizations are considering pulling out of Andhra Purdesh entirely, because the rate of nonpayment has skyrocketed since October. This has ramifications for your state in barring access to life-changing loans, but it has more global impacts as well—should Andrah Purdesh continue to be a financial sinkhole, any institution that persists there will be losing out on funds it could be committing to people elsewhere.

That said, this new law had the tremendous impact of forcing India to draw up official regulatory laws to limit abuse through its Reserve Bank. Grameen was among the first to hail the new board, as it will cap loans and it will prevent more than two loans from being given, among other measures designed to protect the consumer. It may not be as strict as it ought to be, but it is certainly a start, and Andhra Purdesh has itself to thank.

I would encourage you to rethink your state’s much stricter policy in the wake of the Reserve Bank of India’s superseding, much more broadly applicable laws. It has been easy to rally popular sentiment against the organizations—some have been abusive, and many hail from the easy-to-hate West—but I hope you can find a way to lighten the rhetoric and to find a new scapegoat. Because when microfinance is done ethically, it is an incredibly potent force for good. And when it comes time for your next elections, would you rather be the politicians who ended a globally lauded practice, or the ones who stopped all of the bad things associated with it while keeping all of the good? In allowing a regulated form of microfinance, you will be making sure that your citizens still have access to loans that literally can change their lives. I’m no politician, but this seems like the best way to do right by your constituents.

Note: I will add sources once I get back to my computer.

Despite its name, IFAD is no fad

February 24th, 2011

Before I begin this week’s post, I’d like to provide an update on my microfinance project—this past week, I got my first repayment on my microfinance investment through Kiva.org. Of my $25 invested, I so far have recouped $3.12 from the Let’s Unite Group, which aims to increase the production capacity of a rural bakery in Sierra Leone. I’m excited to re-invest it, but I think I’ll wait til I’ve recouped more of the investment before helping someone else. I wish Kiva would provide status updates—I think it’d be more rewarding and satisfying to know if the borrowers are faring better off now. As for MicroPlace, the for-profit alternative, it seems as though I will not see any return until September, so further updates are unlikely.

For this week’s topic, I want to address how microfinance could potentially help to support small farmers in Africa. This past week, former UN leader Kofi Annan claimed that with aid, Africa could feed the world’s farmers. With the help of the UN’s International Fund for Agricultural Development (IFAD), small African farmers have already been helped—“partnerships involving IFAD and AGRA have leveraged US$160 million in affordable loans to agriculture from commercial banks in Ghana, Kenya, Mozambique, Uganda and the United Republic of Tanzania.” (http://www.reliefweb.int/rw/rwb.nsf/db900sid/KHII-8EA5VF?OpenDocument)

More relevant for the subject of this blog, of IFAD’s microfinance portfolio (as agriculture is investment-intensive, holding an exclusively microfinance portfolio would in many places be an ineffective strategy) 80% has been loaned to women. In African nations, these small, low-interest loans seem particularly poised for success, as small agriculture has long been the pattern in many nations, and women have long played a crucial role in raising plants. Through IFAD’s loans, it is conceivable that more countries could start to shake some of their dependence on foreign crops, that they could help to curb issues of hunger, all while simultaneously giving rural citizens the ability to empower themselves. And by charging a small interest rate, the impact of IFAD stands to grow with time. And although countries continue to have issues with loan defaults (take a look at http://allafrica.com/stories/201102240919.html for a discussion of Rwanda’s incredibly low rate of repayment), I still remain optimistic that ethically minded organizations like IFAD can effect some valuable change.

Microloans, Micro Impact?

January 20th, 2011

As I have continued my research into the topic of microloans, I came across an article in the New Yorker (http://www.newyorker.com/talk/financial/2008/03/17/080317ta_talk_surowiecki), which argues that despite much of the fanfare surrounding loaning small sums of money to struggling entrepreneurs, the net impact on their economies is negligible. Most microloan requests are not, in fact, for massive expansion of business or for the hiring of new employees; rather, the majority of them serve to carry a business over through a down period.  Phrased differently, most microloans go toward single entrepreneurs who are working toward goals of personal subsistence, versus toward the goal of creating thriving businesses that hire many of their countrymen.

Indeed, a quick survey of most requests on Kiva and Microplace confirms this. The first result I found, that of Rebecca Del Socorro Garcia Mendieta, is a woman seeking additional funds so that she can buy additional supplies to grow her personal business in retail. Understandably, she has an entire family to support and thus may not be inclined to hire additional workers she would have to pay, but it means that the impact of the loan could prevent more substantial change. (http://www.kiva.org/lend/266894). This is not to say that her work is invalid, simply that in countries with high unemployment especially, some more consideration should be given to entrepreneurs who want to create jobs.

Or, take as a counterexample Microplace, the for-profit microloan aggregator I mentioned in my previous post. Microplace deals largely with umbrella organizations, which make the individual loans. There, it is impossible to see what entrepreneurs specifically want to be doing with their money, nor what their plans for hiring additional employees are. (https://www.microplace.com/investments/details/FINCA+Microfinance+Notes+-+4yr+-+350bps?cmp=featured_listing)

As a part of this project, I have reached out to Kiva to ask whether they would be willing to begin featuring information about whether microloans will be used by entrepreneurs who hope to create businesses that employ more people than themselves alone. Whether they respond remains to be seen.

Next week, if I hear back, I’ll talk about the response and then focus on some of the organizations such as the Omidyar Foundation and Google.org that have begun to get into funding mid-level entrepreneurial ventures in the third world.

Microloans: Promise and Peril

January 13th, 2011

Introduction

“Can I borrow a feeling? Could you send me a jar of love? Hurtin’ hearts need some healin’. Take my hand with your glove of love.”–Kirk Van Houten

As with many authors before me have done with subject-driven blogs, I decided to start mine off with an italicized quote.  Over the course of the next two months, I will be exploring a subject much more substantial than this quote by Mr. Van Houten might portend, that of women, microloans, and the cultures they work within.

Microloans: a Primer

Much like their macroloan counterparts (generally just called “loans”), microloans are small sums of money banks or dedicated financial institutions make available to people, generally women, in impoverished nations.  With these loans, they theoretically can invest in themselves through learning a trade, developing a business, or improving one they already have.  Eventually, this grants them a degree of success that will allow them to repay their debts.

While microloans are anchored in philanthropic considerations, they are not intended as philanthropy.  Instead, loans given are expected to be repaid, with the central idea being that doing so fosters in entrepreneurs a sense that they are believed in and entrusted.  As stated on the Kiva.org website, they use microloans rather than donations because it imbues loan recipients with senses of:

  • Dignity: Kiva encourages partnership relationships as opposed to benefactor relationships. Partnership relationships are characterized by mutual dignity and respect.
  • Accountability: Loans encourage more accountability than donations where repayment is not expected.
  • Transparency: The Kiva website is an open platform where communication can flow freely around the world.

(http://www.kiva.org/about)

Origins

Although microloans have been used as far back as the 1700s and likely have parallels still earlier than that (see http://129.3.20.41/econ-wp/eh/papers/9704/9704003.pdf for a well-written discussion of the impact of micro-loans in helping the poor in Ireland, and how the semi-philanthropic efforts became less helpful with time), microloans as we understand them today emerged in the 70’s through economist Muhammed Yunus.  With his Grameen (Bangla for “rural”) Bank, he began loaning small amounts to impoverished women and men in a local village called Jobra.  Through its success and the eventual success of neighboring communities, the program expanded to encompass all of Bangladesh and, eventually, the poor nations worldwide.  Grameen Bank is currently 90% owned by the rural people that Grameen has helped, while the other 10 % remains in the hands of government.  (http://www.grameen-info.org/index.php?option=com_content&task=view&id=19&Itemid=114)

Other organizations have since followed in Grameen Bank’s footsteps, such as the aforementioned Kiva.org, the for-profit variant Microplace, and, more locally, the Valley Economic Development Center in the LA area.

Conflict and Controversy

Microloans are not without their dissidents.  The number of microloans issued per year appears to be growing at what some naysayers say is an unsustainable rate.  There’s an increasing rate of default, and some critics have alleged that microloan advocates have pressured rural workers into taking loans, only to harass them when they are unable to repay their mounting debt.  Additionally, it remains to be seen how open most societies are to the financial independence such grants give to women.  I hope to explore some of these darker sides to microloans through the course of this quarter.  (Check out http://www.nytimes.com/2011/01/06/business/global/06micro.html?_r=1&ref=vikasbajaj for a more in-depth look at some of the downsides of microloans.)

Firsthand Experience

As I wrap up this first post, I wanted to note that in order to better immerse myself in this subject, I signed up for Kiva and donated the last $25 needed for a woman named Ramatu Kamara in Sierra Leone to expand her baking business.  The time for repayment is anticipated to be ten months, and the organization has a relatively high delinquency rate (3.10%), so I am unlikely to see any meaningful contact or return this quarter, if at all.  That said, with any return on the money I will be able to re-invest in other entrepreneurs, or I can donate it all to Kiva.  (With Kiva, I can’t profit off of my loans).  That said, should any updates come in, I will be sure to share them.  By the same token, I will reach out to some of the other donors in the same project in order to get their impressions of the program. (Learn more about the recipient here: http://www.kiva.org/lend/264387#lenders_to_group).

For balance, I have also invested $25 through the for-profit MicroPlace, which I already feel a little bit uneasy about.  The money will be loaned to a South African organization named Kuyasa, which supports far more women entrepreneurs as they continue to recover from the impact of Apartheid.  The interest rate is low (1%), and I have justified my activity in the program to myself by promising to re-invest any proceeds I make in women.  I will be interested in seeing how my involvement here contrasts with what happens with Kiva, and I just hope that both actions result in far more good than harm.

Entrepreneurs Ramatu Kamara , Janet Kamara, Kadiatu Kamara, Liama Turay, and Marie Kamara.