MicroLoans and Women
MicroLoans and Women: that is what I Googled before I started this blog post. Numerous websites were listed that linked me to a website where I could donate $25 to help save and change a woman’s life. The first link I clicked on sent me to a website that provided business start-up loans to women living in rural East Africa. There is a video highlighting the Women’s Microfinance Initiative, or WMI, that shows women in an outdoor class learning about how to start a business from the money they are borrowing and how to support a growing business.
The website talks about its goal of providing loans to impoverished women and then addresses why women should receive these loans, saying:
WMI is tackling global poverty and the disenfranchisement of impoverished, rural women. Launched in 2008 in rural Buyobo, Uganda, WMI has provided over 15,000 microloans to chronically poor women in Uganda, Tanzania and Kenya, many supporting AIDS orphans. Borrowers start small businesses and use their profits to pay for school fees, food and healthcare. Communities benefit as borrowers hire helpers and advocate for local improvements.
Empowering women living in desperate poverty in rural East Africa promotes in-country development from the bottom up. Women become involved in grass roots movements and advocate for far-reaching social and economic changes in their own country. The borrowers’ priorities for the use of their profits are: better nutrition, healthcare and paying school fees for their children. WMI provides outreach in all of these areas by empowering women with options to provide better care for their families.
After learning about this particular project, I decided to learn more about the organization who is providing all of these loans. Women’s Microfinance Initiative works with three countries in East Africa: Tanzania, Uganda, and Kenya. According to the website, features of the loans include:
-Loan amounts of $50 – $150 (increase to $250 after 18 months
-No collateral required
-Distribution through existing village-level organization
-Term of 6 months
-Interest rate of 10% flat for the loan term
-No late fees
-Successful borrowers are eligible for follow up loans
-Loan groups of 20 borrowers
-Weekly Support Group meetings
-Training, technical assistance, follow-up support
-Local Coordinators visit borrowers on a regular basis
-Regular reports provided to WMI
-After 24 months, borrowers transition to a bank loan or become self-financing
All of this seems good, right? Well Hugh Sinclair, author of Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor, isn’t so sure. Sinclair spoke with the Wharton School of the University of Pennsylvania in 2012 about his book and why microfinance does not always work.
Sinclair talks about “mission drift” or “the idea that microfinance has forgotten its mission to serve the poor and really exists to make a profit for the officials running the programs” and how people borrow money from one bank at a high interest rate and then end up having to borrow from a second bank to pay off the first which leads to serious debt and vicious cycle. This is obviously the most prominent problem with microfinance. Although a lot of theoretical good can come from donations, most of the time the people who are doing the donating do not actually know where their money is going, where it ends up, or if it actually leads to a profitable business.
(A link to Sinclair’s interview can be found here).
The country I have been focused on most this semester in Liberia so I wanted to know how much money they had received through microfinance loans. According to MixMarket.org, Liberia has received $14.2 million in microfinance loans since 2009. I had no idea if that was an astronomical amount or was less than average compared to other African countries so I looked up a few more countries for a comparison. From the same website I found that Uganda has received $607.2 million, Tanzania has received $1.1 billion, and Kenya has received $3.1 billion (note that these are the three countries supported by WMI). The $14.2 million that Liberia receives seems like nothing compared to these numbers. Are these other figures so big because there are more people who are receiving loans or are the people who have received loans in the past taking out other loans to pay off their first loans?