Empowering poor women through tiny loans

A mother is a school. Empower her and you empower a great nation. — Hafez Ibrahim, Egyptian poet (1872-1932)

Money, says the proverb, makes money. When you have got a little, it is often easy to get more.The great difficulty is to get that little. — Adam Smith, the Wealth of Nations

Poor women’s suffering has long been a surefire way to pull on the heartstrings of rich donors, but in recent years there has been a new-found appreciation for the role that these women play in breaking the cycle of poverty and stabilising fragile societies. Development experts now widely recognise women’s role as critical to economic progress, healthy civil society, and good governance, especially in developing countries. Providing women with more and better opportunities to fulfil their social, economic and political roles is now deemed so essential for reducing poverty and improving governance that women’s empowerment has become a development objective in its own right. The key levers for change, from the ground up, are clearly female education and women’s access to income. Top down, women’s leadership — at the local and the national level — is also important.

Societies that invest in and empower women are on a virtuous cycle. They become richer, more stable, better governed and less prone to fanaticism. Countries that limit women’s educational and employment opportunities and their political voice get stuck in a downward spiral. They are poorer, more fragile, have higher levels of corruption, and are more prone to extremism.

One of the most popular models for empowering poor women in developing countries is now what is famously called “microcredit” or “microfinance” in its wider form.

One of the most powerful tools for financial empowerment of women from low income households is microfinance. For those who may not have full clarity of what microfinance really is, let us refresh the definition.

Microfinance refers to a variety of financial services that target low-income clients, particularly women. The services include loans, savings, insurance and remittances. Microloans are given for a variety of purposes, frequently for setting small businesses. The vast majority of microfinance clients are women. Poor women often have the best credit ratings. Women tend to default on loans less often than men. As a result many microfinance institutions target women as customers. This has benefits for poverty reduction, and for the women themselves.

Credit extended to women has a much greater impact on household consumption and the quality of life for children. Women’s status, both in their homes and communities, is improved when they are responsible for loans and for managing savings. When women control their own income, they gain a level of power that allows them to make decisions independently and command more respect.

My experience of working with poor women emphasises the fact that work is their foremost priority, around which their lives revolve. As they say, “If we work, we survive.” Besides intermediation, all manner of self-employment — sewing, delivering small items, making handicrafts — could be facilitated with a small amount of capital for a sewing machine, a bicycle or tools.

There are various legal, regulatory, policy, and cultural barriers that impede women’s participation in the financial ecosystem. Addressing this gender gap would yield benefits not only for women, but also for their families, communities, and beyond. From a provider standpoint, the gender gap presents a market opportunity. Evidence has demonstrated that there is a clear business case for serving women, who tend to save more relative to their total income than men, repay loans at a higher rate, buy more products per capita, and be more loyal to their bank if they are satisfied with the customer service environment women are often disproportionately affected by legal, cultural, and educational barriers to formal financial services.

But for microfinance to succeed as a tool for empowering women, men have to be properly sensitised so that women are allowed both time and freedom and opportunity to chart out a path of social and economic independence. Treating women with the inherent dignity that she was created with, ensuring that their rights are preserved and advocating that they are given equitable opportunities to succeed is necessary. The way forward requires levelling the playing field, by changing hearts and minds, if possible, or by instituting affirmative actions, when antiquated cultural norms prove too intransigent.

It is clear that women’s empowerment, like many things, cannot be imposed on a country or a culture from the outside. Men and women must first find their own reasons and their own justifications to allow women a fuller role in society.

Like men, women deserve to be free. It is only a matter of time until the day comes when they (women) test their chains and break free. Empowering women should be as much a man’s responsibility as it is of others.

As the great savant Rumi says in his epic work Mathnawi, “Woman is a ray of God. She is not just the earthly beloved; she is creative, not created.”

The writer is a well-known banker, author and Islamic researcher. He can be reached at moinqazi123@gmail.com