Microcredits, Blessing or curse
– A multi-part series about the pros and cons on micro finance, Part 3
by Sabriye Tenberken
After having examined the opportunities and challenges of micro finance in the first two blog entries, in Chapters 1 to 4, I will now focus on possible motives of the lenders and their business secret: Targeting mothers facing poverty.
- Motherly feelings as the repay guarantee
“When a destitute mother starts earning an income, her dreams of success invariably centre around her children. A woman’s second priority is the household. She wants to buy utensils, build a stronger roof, or find a bed for herself and her family. A man has an entirely different set of priorities. When a destitute father earns extra income, he focuses more attention on himself. Thus, money entering a household through a woman brings more benefits to the family as a whole.” – Muhammad Yunus, economist from Bangladesh, founder of Grameen Bank and Nobel Peace Prize Laureate.
The questions I had asked myself during these weeks, in which I have researched about micro finance and its consequences, are whether microcredits are a means of women emancipation, or are they doing the opposite, namely the manifestation of gender injustice?
But let’s start from scratch: Why do male lenders prefer women as borrowers?
“Oh, that’s clear,” the micro-banker would say, “we are concerned about the emancipation of women! As soon as the woman herself has access to financial services, she will be able to free herself from the dominance of men. She will be able to make her own decisions, and these decisions are always in the interest of the family!”
Sounds plausible at first. And not only that, but these new micro-bankers also sound really likeable, empathetic and even refreshingly activist.
But what about their business model?
“No problem. Doing good and maximising profits don’t have to contradict each other!”
Is this a financial “revolution”, a fundamental change of mind, or is the devil hidden deep in the banker’s briefcase?
In order to answer these questions, we must try to put ourselves into the shoes of the micro-bankers.
Micro banks are first of all interested in spreading the maximum number of loans as quickly and profitably as possible among their “customers”. The high return rates are crucial for success. And don’t forget about the average 30% interest that needs to be paid along with the principal.
But who traditionally needs credit?
Entrepreneurial personalities who either want to implement a business idea or who intend to expand an existing business and need a start-up capital to do so. Entrepreneurs tend to not shy away from risks. And that’s what makes lending money a gamble. How much risk may it be? Who has a creditworthy idea? Who can afford it? Who can you bet on?
Until the founding of Grameen Bank by the economist Muhammad Yunus in 1983, the beneficiaries were predominantly educated middle or upper-class men who had to submit a business plan. Business and risk-taking were seen more as male qualities, deliberately or unintentionally keeping women away from financial services. Since the 1980s, however, this attitude seems to have changed. For the micro-finance-industry that is globally worth hundreds of billions of dollars, it is all about this new target group: the true guarantors of success! We talk about the poorest of the poor, about low-income class women who would never have had access to financial services before the Grameen age.
Today, however, under the label of “financial inclusion”, the doors to micro banks are wide open for women. They are welcomed with open arms and offered “financial assistance” as a springboard out of poverty.
Conventionally this would be seen as a significant risk.
Unlike traditional lending, the borrowers who apply for a microcredit are often not assessed for the ability to start a business. Also, in most cases, the women don’t have to provide any collateral. So, what is the final reasoning for giving out a credit? It seems that it comes down to need on one hand and the biological sex on the other.
Let’s look at these in detail:
Need creates inventiveness. We all experienced this at some point. In times of crisis, we suddenly succeed in activating hidden potentials. We are awake, strong, resilient and able to find creative solutions to old and new problems. However, facing a crisis also makes us very vulnerable. We grab at every straw that is held up to us without considering whether the assistance might force us even deeper into the mess. Both creative problem-solving and vulnerability which leads to being needy, meet the criteria of being a potential micro-credit receiver.
And then there is the “revolutionary” focus on women: if we look at this new category of customers from the point of view of lenders, it becomes obvious that they might use a few common female stereotypes:
“Women are brought up to be selfless and take responsibility for others.”
“They see the welfare of their own family as a priority. Everything else, including personal needs, will be put aside.”
“When women become mothers, children and the household are most important.”
In patriarchal structures, and most cultures of this world are patriarchal, these qualities can be considered true for women and especially true for mothers. Why not?! Wives and mothers often have no choice but to be exactly as one would expect her to be: caring and always ready to sacrifice, a sense of selfless responsibility, and the need to please everyone. This is not only important when it comes to raising children or keeping a husband happy; they are, no doubt, qualities that belong to the mentality of a perfectly creditworthy personality.
The unusually high return rates of 95 to 100%, a gold mine for the financial sector, may be surprising, but on closer inspection they are logical. In a patriarchy, the woman learns from an early age to fulfil the imposed duties first and only then to take care of herself.
And that’s exactly what’s happening. The loan is repaid on time in full, with interest, even if it affects one’s own well-being. It’s quite different for male borrowers, who tend to be more immune against external pressure and able to live well despite owing money to others. Women, due to their socialisation, are therefore the more suitable debtors. It is not because they are better at business than men; It is their programmed altruism that forms the guarantee of repayment. In addition, illiteracy among women is very high in many countries. So, what happens to a business contract that cannot be read and understood? A thumbprint seals the deal. So, the lack of education becomes a business advantage.
And there are other reasons that make women a popular target group. Gerhard Klas, a German journalist and author, quotes Sardar Amin, a former manager of Grameen Bank, in his essay, “Mythos Mikrokredits”. It says that women are easier to grab and less mobile.
The village and the community are particularly important for women. It often happens that a woman does not leave her own place of residence for as long as she lives. Everyone knows where she is and what she is doing. For the Grameen Bank, that was a decisive advantage. “The villagers take care and stick together.”
An additional aid that micro borrowers receive is the allocation to a “liability group” or “solidarity group”.
These are five to ten borrowers who are supposed to help each other build up a possible business idea and, of course, to repay the loan. But this is where it could start to get ugly.
Gerhard Klas and the documentary The Micro Debt by Tom Heinemann show exactly how this solidarity can turn into the opposite when it comes to money. The women start to clash against each other. A sick child is kept secret because one does not want to be excluded from the group for having other financial burdens.
Teh Francis, a 2016 kanthari graduate, was one of the first to bring microcredit to Cameroon. In the meantime, he became rather critical of this practice and instead took, in my view a convincing alternative path, which I will describe in the fourth part of this series.
His reservations have to do, among other points, with the so-called “solidarity groups”. He experienced how the pressure of being indebted to an external organisation, the MFI (micro-finance institution), was very negatively projected on the whole group. The consequences were not solidarity or cohesion, but the unleashing of psychological terror. It did not stop at “talking sense” to the insolvent group member. It went from bullying to exclusion, and if all that didn’t help, all that remained was: “Save yourself! Every woman for herself!”. Some of the women disappeared without a trace. They left their families and their communities behind on the assumption that the debts had been repaid with their own disappearance. According to Teh, the women who have not repaid are in the minority. But he, too, believes that too many health and psychological sacrifices had to be made in order to be able to comply with the contracts with the respective MFI.
Finally, there is evidence that a large number of women apply for loans for their husbands. But men usually love to buy consumer goods such as motorcycles and televisions, and again there is nothing left for healthy food and for the education of children.
“Emancipation of women is not simply done through financial independence.” Explained Tosin a Nigerian kanthari graduate from 2013.
“My mother had always told me: get a good education and find a well-paying job, then only then you will never be a victim of domestic violence.” Tosin followed her mother’s advice. She studied hard and got a well-paid job. And yet she was beaten so hard by her husband that she woke up in a hospital.
“I allowed him to beat me. Even though I was financially independent, I was far from mental empowerment!”
Tosin had opened my eyes. Until then, I had no doubt that women would only have to have the same opportunities as men; that they would only have to be financially independent in order to free themselves from patriarchal structures. But the reality is much more complicated.
Sustainable social change only happens when the inner attitude to one’s own role, to self-worth, changes. To do this, however, the environment, even an entire society as a whole must also change, especially in its understanding of gender roles. The quote from Muhammad Yunus at the beginning, however, demonstrates that Grameen Bank and its followers are not concerned with this kind of social change. The role clichés are reinforced and it’s “business as usual” at the expense of women.