Women Saving for Change - A WOW! e-Brief
OPENING DOORS FOR WOMEN THROUGH ECONOMIC EMPOWERMENT: AN OVERVIEW
In the developing world, women are often marginalized from society and face a variety of social, cultural, and economic barriers. Approximately 70 percent of the over 1 billion people living in poverty around the world - living on less than $2 per day - are women. Undoubtedly, the lack of access to resources, including education, financial capital and skill building, contributes to women’s low economic status in the world. In recent decades, new approaches have been developed to help people living in poverty gain access to the financial resources and skills they need to improve their economic situation. The most important of these are microcredit institutions and savings and credit groups.
Microcredit consists of granting small loans to unemployed people, poor entrepreneurs and others living in poverty who are not considered to be “bankable,” that is to say people who lack collateral, steady employment or a verifiable credit history. These individuals are unable to meet the minimum qualifications to receive access to traditional credit. In many developing nations, the self-employed comprise more than 50 percent of the labor force. By granting access to small amounts of credit with reasonable interest rates, many among the poor are able to develop household or small businesses (microenterprises).
Many microcredit organizations, such as SKS Microfinance and NamasteDirect, which operate out of India, focus entirely on women borrowers. Approximately 96 percent of the loans provided by Grameen Bank are given to women.
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The reasons for the gender discrepancy in loan recipients are both practical and focused on bettering the status of women. First, studies have shown that women are a lower credit risk than men because they repay their small loans at a higher rate and use their profits to grow their businesses or to help their children. Second, the idea behind microcredit, which was developed by Mohammed Yunis in the mid-1970s, is that by giving poor women access to small loans, they are able to start microbusinesses that subsequently give them a way to improve their livelihoods. According to the Microcredit Summit Campaign, the microenterprises started by women help raise their social status within their community and promote women’s economic empowerment.
Despite many well-deserved praises given to microcredit institutions, such as the Nobel Peace Prize being awarded to Grameen Bank’s Mohammed Yunis in December 2006 and the naming of 2005 as “International Year of Microcredit" by the United Nations, this system of credit has its detractors. Critics claim that one of the problems with microcredit is that it is seen by many to be the answer to rural poverty, which demonstrates a lack of understanding about the complex nature of poverty. Providing the poor with start-up capital can certainly form one part of the solution to poverty, but it mainly benefits entrepreneurs - those who do not suffer from extreme poverty and are able to develop and implement business plans. In addition, in the majority of cases, control of capital remains outside of the community and under the control of an outside institution, such as Grameen Bank.
Furthermore, microcredit is founded on the idea that free markets are the answer to alleviating poverty, which ignores the structural barriers to success that the poor, and especially women, face. Because of this assumption, the social and political work needed to guarantee that the poor have basic human rights within their communities is often forgotten. For example, women in developing areas experience an unequal distribution of labor as they are primarily responsible for care-taking, subsistence agricultural production and collecting water and firewood. Unless the social situations within these communities change to provide a more equal distribution of labor, many women simply would not have the time to run microenterprises even if they were granted credit to do so.
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A viable option to providing economic opportunities to the world’s very poor is the creation of savings and credit groups. Groups are made up of community members who contribute their own resources, such as money, tools or livestock, to group assets. In most cases, member contribution is set at the amount the poorest member of the group can afford to pay, which can be as little as $0.25 per month. Unlike microcredit, the pool of money belongs to the group itself and repayments of credit and interest go directly to the group as opposed to an outside institution. The money generated from repayments can be used to provide credit to others, dispersed as individual dividends or used to make group investments in community improvements. The use of savings and credit groups is a more holistic approach to alleviating poverty since it is usually accompanied by other development projects, such as agricultural improvements, improving access to health care and diversification of income-generating activities. In World Neighbors work in Nepal, for example, women’s savings and credit groups invested in and now maintain self-supporting reproductive health clinics and water improvement projects.
Unlike microcredit programs, savings and credit groups enable members to determine the criteria for the types of loans provided. Initially, many loans may not be used for economic purposes, and some members may request credit for social activities, such as a wedding, education, health or simply to buy food. Some groups decide on lower interest rates for crisis situations or credit for activities that will benefit the community as a whole, and higher interest rates for other types of loans. Because the group has control of the money, members have a vested interest in promoting the success of the group. Savings and credit groups contribute to the creation of stronger communal ties, with members being more committed to repay their loans. Because loans often go to family members, friends and neighbors, members also feel a duty to help those who are having trouble repaying their loans and do so in various ways, like by extending repayment dates or providing business and financial counseling.
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An important characteristic of savings and credit groups is that they usually work in conjunction with improving the social and political conditions of the community. In most World Neighbors-supported groups, improving gender relations is integrated into savings and credit work. The groups provide poor women the opportunity to work collectively and share concerns, a process that inevitably increases the trust and cohesiveness of the group. Women’s ability to contribute to family income often improves their self-confidence and gives them more bargaining power within their familial relationships. World Neighbors savings and credit groups also address the needs of men in a given community. An important component of these groups is their goal of sensitizing men to the difficulties women and they, themselves, face and improving gender relations through various activities, such as couple communication work.
World Neighbors supports the establishment of savings and credit groups in many of its partnering communities. The holistic approach associated with savings and credit groups complements World Neighbors goal of improving communities through capacity building. Savings and credit groups are founded on the idea that poverty in rural, marginalized areas is more than just a lack of money, rather it involves all aspects of a community—infrastructure, resources, health care or water management, as well as social relations. Savings and credit groups empower their members to make individual gains as well as communal ones.
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Photo credits for this page (from top to bottom):
1. Photo by Linda Jo Stern/ World Neighbors
2. Photo by Natalie Elwell/World Neighbors
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A WOW! e-Brief
Work of Women @ World Neighbors
October 2007
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