Throughout the world, 190 million people hold a microloan. Eighty percent of them are women. To better understand the causes of this disparity, it is necessary to dig back into the history of microfinance and analyze how microcredit works. Five years after the World Bank launched the initiative called “Empowering women”, MyScienceWork interviews Arnaud Ventura, cofounder of PlaNet Finance, and outlines the impact of microcredit on the empowerment of women.
This article is a translation of “Le micro-crédit : un outil financier au service de l'émancipation des femmes” by Timothée Froelich.
“Nowadays, more than 2.9 billion people live with less than $2 a day,” states Arnaud Ventura, cofounder with Jacques Attali of the group PlaNet Finance, an international organization developing the microfinance sector. For them, it is crucial to set up mechanisms that can help start income-generating activities. This is exactly what microcredit exists for. The contributions of microcredit also extend to empowerment of women. However, this is not a miracle tool. “Even if numerous studies have shown that microcredit constitutes an effective innovation to reduce poverty, we must remain vigilant on the conditions of its use by respecting certain ethical principles,” stresses Arnaud Ventura.
By looking at the flaws in the traditional banking systems of his country, Muhammed Yunus, a pioneer of social innovation and 2006 Nobel Peace Prize recipient, decided to revolutionize the financial system of Bangladesh. In 1976, he created the first microcredit institution: the Grameen Bank. His main objective was to lift impoverished populations out of exclusion with the help of microloans. “Yunus also wished to restore the dignity and self-confidence of these men and women entrepreneurs,” adds Arnaud Ventura. In other words, the influence of microfinance was not to be limited solely to the economic level. It went far beyond, reforming mores and mentalities, and redefining the role of women in the conservative society of Bangladesh.
Microcredit, an effective economic model
The overwhelming poverty throughout the world is what makes very small loans interesting. It was possible to achieve historically very high rates of repayment thanks to the principles of microfinance, based on trust, spatial proximity with the microborrower, and an excellent understanding of his/her needs and ability to repay the loans. “Even if there are no traditional material guarantees, like salary statements, or repayment records, some specific techniques are set up to make the loan possible: developing group guarantees between borrowers, or by developing techniques allowing the evaluation of the borrowers’ repayment abilities based on income and future cash flow,” explains Arnaud Ventura.
A woman in India – mckaysavage
Women, the first beneficiaries of microfinance
Microfinance targets those in the most need, and generally those who do not have access to financial services. In many cases, microfinance institutions focus especially on women. For women, microcredit was far more than a mere income-generative initiative: it contributed tremendously to their empowerment. In developing countries, women are frequently confronted with a feeling of insecurity and a lack of autonomy. Financial responsibilities help them regain their self-confidence, and building a better future for themselves and their children. Furthermore, women’s repayment rates are generally higher than men’s, because they are more attentive to managing the household budget. However, some men, like husbands, brothers, or cousins, have managed to use women to get loans that they could not have obtained themselves.
Although it is difficult to make comparisons between countries because of the multifaceted nature of microfinance, this sector, estimated at US$65 billion throughout the world, helps women to achieve financial independence, and especially greater control of their lives. Surveys conducted directly in the field highlight the true impact of this tool on the improvement of women’s living conditions. The information gathered is also very useful for creating products (microcredits, microinsurance, savings…) that are better adapted to local populations.
To find out more:
Empowering Women through Microcredit: a Case study of Tameer Microfinance Bank, Bahawalpur. Nawak , A. Jahanian, S. W. Manzoor, [Available on MyScienceWork]
Why are women at the core of the microcredit system? by MicroWorld of the PlaNet Finance group.
Empowerment through Women, technology and mobile phones, Laurence Bianchini
At Mothership HackerMoms, the Freedom to Be Empowered, Lisha Sterling