strategy

Providing affordable loans to women

Synonyms:

Furnishing financial support to women
Providing credit facilities for women
Ensuring access to credit by women entrepreneurs
Giving poor women greater access to land and credit

Description:

Advance and promote entrepreneurship of women, particularly those women who have not generally had access to the services of established financial institutions, by providing affordable loans. Encouraging direct participation of women in the money economies of their countries. Assisting women's groups in third world countries to gain access to credit.

Context:

Many women in the world are not eligible for credit, or do not want it, cannot afford it, and are even afraid of credit as it is currently available. Among the many obstacles to women, especially low-income women, in obtaining credit are: the legal status of women, by which in certain countries they are classified as minors and cannot acquire credit or only on husband's or male relative's guarantee; definitions of household, where the man is assumed to be the head of the family and that 'normal' families have a male head and breadwinner leads to discrimination against female heads of household and disregard for the woman's income when assessing income eligibility; the definition of a 'proper' job, or one which is considered to provide an appropriate income from which repayments can be made; traditions and laws that prevent women from owning or inheriting property that could be used as collateral; illiteracy, which acts as a barrier to business transactions that involve contracts and forms; the small scale of their needs in relation to the loan processing costs to institutional lenders; and the general reluctance of lenders to believe that poor and illiterate city dwellers, peasants and women can be relied upon to repay their debts. Yet, providing loans to women can increase women's income, reduce their poverty and build women's capacity, status and bargaining power in their communities.

This strategy features in the framework of Agenda 21 as formulated at UNCED (Rio de Janeiro, 1992), now coordinated by the United Nations Commission on Sustainable Development and implemented through national and local authorities.

Implementation:

A credit scheme for house improvement in a poor rural district in Kenya, run by an NGO (Mazingira Institute) had to change its approach when project staff realized that even repaying the very small loans offered would have been a heavy burden on the women involved. Besides, the women's first priority was raising money for school fees for their children. The new approach involved giving small loans to a women's income-generating group, for shelter-related activities. With some technical assistance, the women learned how to make stabilized soil blocks and fibre-concrete roofing tiles for sale. Much later they also learned construction skills. Several years after the start of the project, the women's groups are taking loans for shelter-related income activities and some groups are now thinking of home improvements. A side benefit for the women has been that the materials production and construction skills that they have gained mean they can do their own construction, or supervise the artisans they hire to do the construction for them (so as not to risk losing their money through the incompetence or dishonesty of contractors).

The Working Women's Forum (WWF) started in 1978 in Madras, India, as an intermediary for official lending institutions, helping women through bank bureaucracy and guaranteeing their loans. It has a credit programme that lends to individual women in poor communities, but through community-based groups. Loans are small, but a beneficiary takes a new loan on completion of payment of the previous one. The WWF's experience has been that the priorities of the women change as their economic situation improves with each successive loan. WWF now has its own credit cooperative society for women because the banks were not flexible enough its women clients. Even with the credit cooperative, the WWF has had to fight against conventional procedures and requirements -- for example, making groups rather than individuals responsible for loans was against existing government rules governing savings cooperatives.

The World Women's Bank provides a loan guarantee programme, which serves as a stimulus for economic and industrial growth within local communities. It acts as guarantor in assisting women entrepreneurs set up in the small business sector and provides technical and managerial assistance.

UNIFEM offers access to credit by women entrepreneur groups and has a special credit adviser responsible for the design of multi-million dollar projects. UNIFEM has been able to help thousands of low-income women entrepreneurs obtain credit by working through NGOs in poor communities in Africa, Asia and Latin America, when the vast majority of these women would not qualify for loans through formal banking channels. For instance, in Tanzania, UNIFEM provided a low-income women entrepreneur basic business training and a loan. She was able to buy a pair of donkeys and a cart, and then successfully established herself in the transportation business. UNIFEM and ACCION International provided standby letters of credit to banks in Bolivia and Colombia to leverage secondary lines of credit totalling more than 1.8 million dollars for small loans to women entrepreneurs. This enabled 3,123 women in Colombia and 1,890 women in Bolivia to draw short term loans of up to 450 dollars each to start small businesses. In 1993, there were no reported losses by the banks in either country. UNIFEM efforts led to the launching of an International Coalition on Women and Credit (ICOWAC) in October 1993, in order to have a unified voice to best serve womens' interest for financial services, most immediately at the Fourth World Conference on Women in Beijing, China, in August-September 1995. Objectives include among others: expanding the range of alternative financial institutions and models for delivering credit to poor women; and to advocate for women's access to finance. The Coalition represents over 200 organizations worldwide which serve the credit needs of more than 3 million women entrepreneurs.

Regular UNDP programming includes projects in the sector of credit in which the participation of women is encouraged.

Claim:

1. Question: Why do you find a television set and video recorder in the house with no flushing toilet? Answer: Only because there is no instalment purchase plan for a flushing toilet (and what serious lending institution would advance credit for one?)< 2. "We were all women...they were patient and explained everything and helped us to fill the forms...Before, if we went to the big banks in our dirty saris, they treated us badly...so next time one borrowed a sari from a friend, then they said 'your sari is worth a lot of money, why do you want a loan?'...So either way we could not win. Here they do not ask about our business enterprise, what we will do with the loan and how we can repay..."< 3. What most poor women would like is a convenient savings plan, where her small and irregular savings from her informal income would enable her to obtain small loans for whatever she needs a loan for -- a house, school fees for children, or something quite less inexpensive but for which she is unable to raise the money in one go.

4. There are now many successful credit schemes from which experience can be drawn. What is needed is the recognition of the special problems of women in acquiring finance her needs and the political will to do something about it. Also the involvement of women in relevant policy-making, decision-making and the provision of training and information.

Broader:

Offering personal loan
Offering personal loan
Providing affordable access to credit
Promoting women's economic self-reliance
Creating projects for disadvantaged women
Promoting women's access to land and property
Strengthening participation of women in sustainable development programmes

Facilitates:

Alleviating female poverty
Helping women in exporting
Promoting women entrepreneurs
Providing affordable housing loans
Liberating women worker's economics
Generating supplemental family wages
Expanding social participation of women
Enabling poor to achieve sustainable livelihood
Improving opportunities for women's self-employment

Facilitated by:

Establishing rural banking systems for women

Problems:

Discrimination against women in banking

Values:

Land
Credit
Poverty
Support
Discredit

Organizations:

Women's World Banking
International Coalition on Women and Credit
African Women's Bank
Women, Environment and Development Programme