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Opinions of Friday, 3 May 2002

Columnist: Akyeampong Kobby

Micro-credit for African Women

This paper will be organized in three sections and this will entail discussions on sub-themes within the general context of the relevance of microcredit programs for women in Africa. The first section will focus on an overview of the conditions of African women, particularly the rural and urban poor.

The second section will examine the characteristics of micro-credit programs. This will be followed by a third section which will make the case for micro-credit programs in Africa.

The final section, will examine and evaluate the impact of current micro-credit programs from selected countries in Africa and how these have transformed the lives of women in the respective countries.


According to the UNDP Human Development Report (1994) “ despite all our technological breakthroughs, we still live in a world where a fifth of the developing world’s population goes hungry every night, a quarter lack access to even a basic necessity like safe drinking water, and a third lives in a state of abject despair -- at such a margin of human existence that words simply fail to describe it”

This statement emphasizes the differences in the quality of life between the developed and the developing countries of the world. While the affluent in both developed and developing countries enjoy lifestyles characterized by a host of energy and resource - consuming comforts and privileges, a significant proportion of the world’s poorest people live in severe deprivation, characterized by malnutrition, vulnerability to infectious diseases, lack of education to enhance upward mobility, lack of shelter, and a lack of access to resources that would allow them a way out of poverty.

With a majority of the world’s poor living in developing countries and having a predominantly female face, as contained in the United Nations Development Fund for Women (UNIFEM) Report1992, which concludes that women earn only 10 percent of the world’s income, and own less than 10 percent of the world’s property. Of the more than one billion adults who have no access to basic education, more than 60 percent are women. Of the 1.3 billion absolute poor today that is those who live on less than a dollar a day, nearly 900million are women.

Linda Mayoux (1997) makes the assertion that micro-credit programs are currently being promoted as a key strategy for both poverty alleviation and women’s empowerment on the basis that these programs have the impact of increasing women’s income levels and control over income which ultimately results in greater economic independence.

Another factor is that micro-credit programs provide women in Africa with the access to networks and markets which equips them with a wider experience of the world outside the home. In this process, access to information and possibilities of other social and political roles are enhanced.

Mayoux (1997) recognizes that the establishment of micro-credit programs enhances the perception of women’s contribution to household income and family welfare and this increases women’s participation in household decision-making about expenditure and invariably creates a greater expenditure on women’s welfare. Finally, these programs tend to help greatly in changing the attitudes of men to the role of women in the household and the community in general.

Micro-credit, micro-financing and micro-enterprises are terms that have been used to describe and define the situation in which small loans are extended to people for the purposes of setting up small and usually self-employment projects that generate income.

For the purposes of this paper, the terms micro-financing, micro-credits and micro-enterprises will be used interchangeably to describe programs that offer a combination of services and resources to people who under normal circumstances, do not have access to the commercial banking sector.

The programs and services offered are usually established for the purposes of creating and developing self-employment opportunities. Thus a micro-enterprise based on the application of these terms, would refer to a sole proprietorship that has fewer than five employees, does not have access to the commercial banking sector and can initially utilize a loan of under $15,000. These “small” loans are utilized through micro-enterprise development programs, which are usually run by non-profit organization that provides a combination of credit, technical assistance, training and other business and personal assistance services to micro-enterprises.

Clark and Kays (1995) give the characteristics of micro-credit loans as “ facilities with an average size of $5,640, with terms ranging from one year to 4.75 years. The programs charge a market rate of interest that is between eight to 16 percent, and these loans are generally secured by non-traditional collateral, flexible collateral requirements or group guarantees”.

The Characteristics of Micro-credit Programs in Africa In the business of micro-credit financing, there is a premise that borrowers are the best judges of their own circumstances and as a result, they know best how to utilize credit facilities when it is available. The thrust of this premise is that each individual has the opportunity to choose the income- generating activity appropriate to her own peculiar situation.

Based on this notion of peculiarity of situation, if a borrower is involved in group lending, she enjoys the benefit of constructive criticism from the members of her lending group. In this situation, the programs have the benefit of both individual creativity and participatory planning initiatives by a group of peers.

The concepts of individual creativity and group planning are just two of the many important characteristics of micro-credit programs. Other essential characteristics include:

  • The targeting of poor people in the society;
  • Tailoring program operations to reach women considered as key recipients of micro-credit;
  • Establish simple procedures for reviewing and approving loan applications;
  • Delivering of credit and other related services to the village level in a convenient and user-friendly way;
  • Facilitate the quick disbursement of small, short -term loans usually for a three to one year duration;
  • Designing clear loan recovery procedures and strategies;
  • Establish an incentive program which grants access to larger loans based on a successful repayment of first loans;
  • Maintain interest rates that are adequate to cover the cost of operations;
  • Encourage and accept savings in tandem with lending programs;
  • Institute a commitment to, and training for democratic participation in decision- making by all those involved as clients;
  • Develop a culture, structure, capacity and operating system that can support sustained delivery to a significant and growing number of poor clients;
  • Provide accurate and transparent management and information systems which can be utilized to take decisions, motivate performance, and provide accountability of management performance and the use of funds, and clearly demonstrate program performance to commercial financial institutions and
  • provide access to business information, expertise, and advice to micro-entrepreneurs.
In addition to these characteristics, micro-credit programs must offer loan menus that meet the needs of their clients. For example, the granting of consumer loans can contribute to the productivity of the poor entrepreneur as well as providing security and reducing vulnerability.

This factor is very important due to the fact that the cost of living in Africa for many poor people is at a precarious level, and this forces people to become vulnerable to a multiplicity of personal and financial disasters: illness generates medical expenses; death creates funeral expenditure; crop failure requires additional expense on food as well as seeds for the next planting season.

The variety of loan menus, therefore assist poor clients in managing these events without forcing families to sell their assets to raise cash or risk the traditional money lenders crippling rates of interest.

The Case for Micro-credit for Women in Africa

It is important in stating the case for the institution of micro-credit programs for African women, to attempt to discuss the underlying reasons why the focus is on women. The women of Africa’s savings, production, marketing and mutual help groups are not new to African societies. Traditionally, women in Africa, have constituted the social, moral, and economic backbone of their respective communities and have proven over time, that, they are effective, skilled creative and highly reliable when launching economic projects.

These qualities and attributes are more important when analyzed in terms of their impact on the quality of life, elimination of hunger and poverty, education, health and economic independence.

Regardless of the benefits that are to be gained from the empowerment and emancipation of African women, experience shows that economic development that is promoted at the macro level in many African economies, often marginalizes women.

In view of the overwhelming empirical evidence that women in general, and African women in particular account for a substantial proportion on the poorest people in the world, there has been a rethinking of aid policy and practices within the donor community and agencies, with a view of redirecting aid resources for the benefit of women.

The change in perspective is due to the assessment that many aid programs have failed to reach the poorest 20 percent of the population in many African countries. As a result, attempts are being made to channel resources through non-governmental organizations due to the growing awareness that the very poor people in Africa, are ready and willing to pull themselves out of poverty if given the chance to access basic economic inputs in an enabling environment. This new insight has led to the growing support for micro-credit programs that serve the poorest people in the urban and the rural areas in Africa.

In making the case for micro-credits for women in Africa, it is very important to evaluate factors that have created the need for the institution of the many micro-credit programs in Africa. In many African countries, the very poor sections of the population have traditionally been recognized by the formal financial market place as not credit worthy and not having a propensity to save any portion of their incomes. Based on this argument, the banking institutions are not willing to extend credit facilities to these sections of the population. The rejection by the formal financial sector forces poor people to rely on local money lenders who charge very high rates usually in the range of ten percent per day. For most peasant populations, paying these exorbitant rates only pushes them into more debts which often is passed on the future generations.

The case for African women continues to remain very critical considering the fact that women contribute a substantial portion of the total food production and also account for nearly 60 percent of the labor force in agriculture but receive less than 10 percent of the credit provided to small scale farmers (UNIFEM Report, 1992).

Contrary to held notion that poor people are not credit worthy, and therefore considered a financial and investment risks, there exist a record of accomplishments and a significant body of scholarly studies that together present a totally different picture. These studies evaluate the concept of micro-credit as a compelling anti-poverty and development strategy on the one hand, and have also established that very poor people constitute a good credit risk in the context of a mutually responsible system.

The value of micro-credit and its high potential to help the Africa’s poor people is reflected in the work of Otero and Rhyne (1994) which reflects seven studies based on practical experience and evaluative research. Otero and Rhyne (1994) study shows that in developing countries, late payment and bad loan ratios are comparable to or below that of conventional banking houses. In this study in which the operations of Banco Sol, a micro-credit institution was analyzed, it was revealed that only .04 percent of the loan portfolio was in arrears beyond thirty days compared with a 4.42 percent figure at the conventional banking institutions.

Even though the creditworthiness of poor people has no basis in terms of gender, there is evidence to support the fact that though women have often been denied access to credit by legal and traditional barriers, experience has shown that women as a group are consistently better in promptness and reliability of repayment. As a result, focusing on women as clients of micro-credit programs has been a very effective method of ensuring that the benefits of increased income accrue to the general welfare of the family, and particularly children. At the same time, women themselves benefit from the higher status they achieve when they are able to provide new income.

Another important factor that supports the establishment of micro-credit institutions in Africa to address the developmental need of women is that micro-credit programs in the developing world have been found to be sustainable. Christen, Rhyne and Vogel (1994) in a paper concluded after a study of eleven leading micro-enterprise financial institutions note that while some of the eleven institutions continued to be dependent on grants and subsidized loans, a number of the these institutions also achieved a state in which they continued to function without the need for these loans.

The overall picture presented by this study was one of a growing trend towards sustainability that held great promise for the rapid growth of micro-credit programs in developing nations. This study proves that micro-credit institutions in developing countries have the potential to become profitable institutions, capable of competing for investment funds in the financial marketplace.

The case for micro-credit institutions in Africa can not be made without reference to the fact that the model of micro-credit institutions, have a high level of replicability. In spite of ethnic and cultural differences, micro-credit programs, using different methodologies, have spread rapidly around the world, in many cases implementing innovations and adaptations that are necessary in different context. For instance, the Grameen Trust has funded project start- ups in nineteen countries in Asia, Africa, and Latin America.

Also, Opportunity International has developed 52 micro-lending partners in 26 countries. The village banking movement has now grown to more than 68 programs in 32 countries. The replicity of the concept is further proved by the ACCION Network which reaches 277,000 clients in Latin American countries and in the United States (SEEP/UNIFEM Report, 1996)

Other examples are provided by the Women’s World Banking Network, that has forty -five affiliates in thirty seven countries around the world, the credit movement in Burkina Faso has created 325 women’s associations which in a three year period have granted 26,000 loans averaging $41.48 apiece for a total investment of $1.11million(

Finally, Development International Desjardins, one of Canada’s savings and credit cooperative movements, has invested a total loan portfolio of $161 million in fourteen developing countries with majority of them in Africa (

Drawing on empirical evidence from other developing countries of the world, there is ample evidence to suggest that micro-credit programs help borrowers work their way out of poverty. The Catholic Relief Services reports that 97 percent of the members of two established village banks in Thailand found their income had increased by between $40 and $200 per year. Susan Hahn and Mario Ganuzza conducted interviews with 380 FINCA village banks in El Salvador, and revealed that weekly income increases averaged nearly 145 percent (USAID/El Salvador Report).

Khander, Khalily and Khan (1995) in an extensive study of the Grameen Bank concluded that there were comparable differences in the wage levels in villages served by the Grameen Bank and that of a control group of villages that lacked a Grameen center. The conclusions was that there was a significantly higher wage level in the Bank villages indicating that economic activity fueled by Grameen credit had tightened the labor market and thereby increased community income. This study also noted that the Grameen borrowers mostly women, in 1994, were saving substantially more than they did in 1987.

Another factor that presents a case for the establishment of micro-credit programs for women in Africa, is that, the programs stimulates savings and asset accumulation among poor people. One of the most important services that many micro-credit programs offer their clients is a safe place to deposit their savings.

Empirical and anecdotal evaluations of many micro-credit programs report conclusively that, from the client’s perspective, learning to save and having a safe place to keep those savings, are principal benefits of the program. The ability to save offers advantages to both the borrower and the micro-credit institution. Borrowers invariably see savings as way of enhancing family security. In addition, savings also give borrowers a yardstick for measuring their economic progress, and this is often a great pride for women who have never had their own working capital.

By providing borrowers with a growing stake in their peer- lending group, savings accumulation provides an incentive for insisting on an efficient and transparent management of funds.

In some micro-credit systems, savings generated by the members of a peer-lending group are re-lent among the group’s members which then creates a second loan portfolio, whose interest income becomes an additional source of income to the borrower.

For the micro-credit lending institution, savings provides an important source of additional collateral for meeting risk of non-payment, and for increasing the supply of available loan capital. Savings as a percentage of total loan portfolio also provides a convenient measurement of the program’s rates of internal capitalization and financial self-sufficiency.

In making a case for the institution of micro-credit programs, an argument is made to the effect that many micro-credit programs are the vehicles for a variety of desirable social development. The essential argument in this assertion rest on the fact that micro-credit can play an important role in increasing access to basic social services and thereby enhancing the well being of the very poor people.

A poor woman for instance, who is able to have access to micro-credit, can also gain increased access to primary health care, safe water and sanitation for her family, and family planning information and services. She is also more likely to enroll her children, particularly girls in school. The common social development characteristic of many micro-credit programs for poor people especially women, is the regular meetings of solidarity groups either on weekly, biweekly, or monthly basis.

MckNelly and Dunford (1996) reiterate that these meetings not only facilitate regular payments on the loans, but also play a crucial role in forging the solidarity of the borrower group. From a program design standpoint, these regular meetings provide and excellent opportunity for learning and discussions about issues such as healthcare, sanitation, family planning, ending marriage dowries, and a running a business among other issues.

According to Ela Bhatt, secretary-general of the Self Employed Women’s Association (SEWA) micro-credit program based at Gujarat, India, “the regular meetings of SEWA clients invariably brings them together to think through their common problems, agree on common issues, decide on common action, and forge common ideologies”. These community initiatives result in the establishment of daycare services, schools, playgrounds, clinics, reforestation, potable water, fuel-efficient stoves, electrification, literacy classes, social security systems and insurance schemes. These projects grow out of the leadership skills and solidarity spawned by peer-lending groups. By this process, micro-credit programs make significant contributions toward building civil society institutions, this provides an important synergy between improving the economic well-being of poor women and fosters the growth of institutions that give them a greater opportunity for participating in their society. For African women, this is especially true since most traditions in Africa, exclude women from the participatory roles which are vital to the functioning of democratic societies.

The Impact of Micro-credit Programs on Women in Africa: Case Studies from Selected Countries in Africa

The International Co-operative Alliance (ICA) micro-credit program in the northern province of Kilimanjaro, Tanzania, provides an example of the impact of micro-credit on the women in Africa. In Tanzania, women are the backbone of the rural communities and constitute half of the country’s population. These women found that the first hurdle they encountered in setting up businesses was access to credit facilities. To the women of Kilimanjaro province, getting a loan from the bank was a nightmare, which involved form-filling processes that never produced the financial resources that they required (

To overcome this hurdle, 30,000 women in this province have set up a savings and credit association with the help of ICA, to raise capital for their business activities. The total amount realized from the contributions of each woman in the province yielded 200,000 Tanzanian shillings which is the equivalent of $400. This money formed the seed capital of the Masasa Women’s Credit Association (

From this seed capital, each member of the association is allowed to borrow half of what she contributed and pay back this amount with an interest of two percent compared to the commercial rate of 30 percent charge by commercial banks in the country. In addition to having access to a regular source of finance, the women of this credit association have been trained in book-keeping, savings and credit management in the areas of co-operative development.

The Savings Development Movement (SDM), now formally recognized as Self -Help Development Foundation (SDF) of Zimbabwe provides another case study of the impact of micro-credit programs on women in Africa. Established in 1963 by a pioneer group of 20 men and women, the SDF has grown to over 5,700 groups nationwide (Chinedza, 1984). The SDF has laid down very simple rules for its operations. The minimum weekly deposits required from members have been set at two and a half cents so that the poorest in the group can afford to make a contribution. The penalty for not making contributions over a period of twelve weeks, was a dismissal from the group. It should be noted that the dismissed member received his deposits less the fine imposed for non-contribution over the twelve week period.

By 1985, the number of savings groups within the cluster of the SDF had increased to 1000 and this resulted the foundation receiving donor support from the Konrad Adenaur Foundation of Germany. The SDF’s activities are concentrated in savings groups and development programs. The SDF works mainly through small groups in both the urban and rural areas of Zimbabwe and it has the following aims:

  • To promote the economic and social development of the people;
  • Encourage members to save money that might otherwise be dissipated;
  • To teach members how to use their savings for development;
  • To educate members to accept responsibility and promote a spirit of self confidence, mutual trust and close co-operation;
  • Organize training programs in income generating projects.
Due to customary laws and practices, rural women in Zimbabwe generally lack assets such as land or cattle. Furthermore, women are expected to provide for the basic needs of children with or without support from their spouses, however with the activities of the SDF, there has been a tremendous appeal to women. Both rural and urban Zimbabwe women see credit as a bargaining chip that allows them access to opportunities such as education, training and group meeting (Goetz,1996).

The SDF acts as a marketing channel for the craft work, a valve from the pressures of domesticity and a forum for education. These factors, have resulted in the fact that women account for 85 percent of the membership of the SDF (SDF Report,1995).

Another case study that reinforces the positive impact of micro-credit programs on the empowerment of women in Africa is that of the low-income women’s bank in Benin in West Africa. Known as the Programme d’Appui a l’ Association des Femmes (PAASF), this micro-credit initiative started in January 1992, with only 15 members. It now has a membership of 2000 lower income women in a single set of 15 savings and credit groups often referred to as “Banques des Femmes”. As at March 1996, the total savings collected by this single unit based in Cotonou, amounted to 10,200,000 CFA($20,400)(

Originally, the main objective of the women was economic however with the passage of time, the social returns are now bigger than the economic ones. This trend explains the possibility of attaining social objectives through economic projects.

Between 1992 and 1996, the “Banques des Femmes” after just four years of activity, has granted 1,200 small business credits to women totaling 23,000.000 CFA($46,000). The impact is immense due to the fact that poor women have gained access to reasonable credit facilities with interest at between 2 and 2.5 percent. This is compared to the existing system where the women had to rely on purchasing their products at a credit which was pegged at between 20 and 50 percent of the original cost of the product(

The social benefits derived from the program relate to the establishment of an adult literacy program, which has become another source of income for 12 members of the group, who serve as facilitators for the literacy program, and the changes in gender relationships between the women and the community as a whole. This is in contrast to what existed before the program began in 1992. It has been observed that women who participate in the micro-credit activities now exercise a newly found freedom in terms their inclusion in decision-making at the household and community levels ( Specifically, women in this

group, can now answer the telephone and are able to read and have access to information that influences their lives. They are also able to leave written messages for their spouses and go about their work instead of the former situation where they had to wait for their spouses before anything could be done.

According to some of the women in the group, there has been a significant decrease in disputes that they have with their husbands since they spend only a minimal time at home. Finally, for the members of this group, they are able to discuss issues with the spouses more thoroughly due to their being literate (


It is estimated that for African economies to achieve growth rates comparable to other developing countries in southeast Asia, their economies need to grow at a rate of 4.7 percent per annum to achieve a reduction in the number of poor people in Africa. Despite the efforts of African governments and the donor communities, the continent is far from achieving the necessary level of growth although there have been indications of an upturn in recent years (

In view of these developments, the current signals that stress on an intensification and support for poverty alleviation efforts must be sustained. Specifically, the enormous potential can be exploited by providing greater opportunities for the poor in the African societies through micro-credit programs, which adopts a “bottom -up” approach instead of the often used “top-to bottom” measures.

In addition to these efforts, it is important to assert that the path to poverty reduction in Africa must include the empowerment of communities, households, and individuals, which allows them to seek their own solutions and welfare enhancing opportunities.

To state this in a very candid manner, the greatest potential is African women and therefore it must be accepted that, investment in women’s education and promotion of their access to productive resources, will promote economic growth, redress the imbalances produced by the discriminatory and marginalization policies, and achieve higher standards of living for the continent as a whole.


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