|Micro Credit As The Way To Financial Independence For Women In Developing Countries|
TIAW is committed to improving the economic security
for women around the world.
A woman's most basic needs and desires are simple. She needs a safe, dry place to sleep. She needs enough to eat. She needs shoes and clothes to wear. She wants her children to have their needs met, and she puts their needs above her own. She wants to make a better life for her family -- regular meals, education for the children, some medicine when they are sick. Women are strong and incredibly resilient, but for those women in developing countries, extreme poverty -- living on less than $1 per day -- crushes the ability to achieve even these simple goals. So the last basic need is the need to find a way up. A woman needs to be able to earn enough to better her life and secure her family's future.
To inch their way out of poverty, women work. They buy chickens or goats and sell the eggs and milk. They set up roadside stands and market stalls to sell homemade food, produce or convenience items. They do dressmaking, tailoring and embroidery. They make artisanal products like baskets and jewelry to sell for export. They buy cell phones and small generators and rent them to their neighbors by the minute or the hour. You name it. The list of women's businesses is endless, because women's creativity is boundless. The entrepreneurial spirit can be as strong in a poor and uneducated woman as it is in the captains of industry. Only her command of resources is different.
Here's the catch. Women's small, home-based businesses have the same capital needs as big corporations, but on a much smaller scale. The women we are talking about -- women who cannot afford to eat more than one meal a day, and sometimes not even that -- these same businesswomen must finance inventory and supplies, pay for space and utilities, and cover any cost of travel and advertising, just like a larger more traditional business. Yet they have almost no access to conventional financial services. If their families cannot help them, most are forced to rely on predatory moneylenders or do without financing altogether. Micro credit is the alternative.
Micro credit refers to very small business loans, offered to very poor and uneducated borrowers who have no collateral. With micro credit there is usually no brick and mortar bank. The lender brings the loan funds and the papers to the borrowers, not the other way around. Several women who live in the same general area all agree to take out small business loans at the same time. The women select a president and a treasurer, and they meet regularly to make their loan payments. These meetings also offer mutual support, problem solving opportunities and social interaction. When all the loans have been repaid, those women who want to can borrow again. This borrowing circle is what we refer to as a village bank. The loans bear interest at a market-based commercial rate. However, the loan terms are fair, and depending on the micro lender, the borrowers receive other services (savings opportunities, business education and support, insurance, etc.). Most importantly, the borrowers are treated with respect and not subject to the extortionate terms and violent collection tactics of "loan shark" moneylenders.
World wide, micro loans have a repayment rate of 95 to 98%. Notwithstanding this incredible record of responsibility, it should be obvious that micro lending has higher processing and administrative costs relative to the return from interest paid. Governments and social investment funds provide sources of financing, but the need for loan capital far exceeds capacity. Larger lenders such as Grameen Bank and Pro Mujer are able to garner sufficient loan capital, but the many smaller and independent micro lenders are still at least somewhat reliant on donated funds with which to make loans. Many of these micro lenders have the ability to become self-sustaining in the long run, but need and deserve support until that happens. This is where the TIAW Micro comes into the picture.
You've heard the expression, "Think globally -- act locally." TIAW Micro does exactly that. We actively engage our TIAW member associations and our individual members in supporting the micro finance industry and in raising loan capital to donate to micro lenders that meet our standards of financial integrity and stability, respect for borrowers and the eventual ability to become self-sustaining. TIAW Micro aggregates donations received and uses the leverage gained from making a larger donation insure that all loan repayments are recycled into future loans, not into management or other activities, and that the lender will send a report with photos and information about the borrowers that we can share with the TIAW women donors. From time to time, TIAW also offers donors the opportunity to take a trip to participate in a bank launch and meet the women who are benefiting from their commitment and generosity.
TIAW Micro is a far-sighted far-reaching program to help very poor women in the non-industrialized world. Many benefits are achieved when women become active participants in their family and community economies. Some of these benefits are seen in higher status and self esteem, and will have implications for the next generation, as well as the borrowers themselves. TIAW is not naive enough to believe that women gaining economic security will solve all the world's problems immediately. However, micro credit helps women and the world take a step along that path. It is a step that we support with pride, with passion and with joy!