Although women are huge stakeholders in some of the biggest companies in the world, particularly those with an online presence, they are still unrepresented when it comes to the heads of these bigger companies. This is not just the case in the Western world – in fact, it is most prevalent and noticeable in underdeveloped countries.
However, there are institutions that are now taking an often-used financial tool and modelling it in a way that is a great fit for those who do not have any financial clout, particularly women living in challenging circumstances.
Microfinancing: A way to empower women
Microfinancing is a way of supplying loans and other basic financial services to the poor. The “micro” in microfinance comes from the fact that these financial services involve smaller amounts of money. Rather than taking out a $60,000 loan, one would take out a smaller loan more suitable for an individual who neither needs a large loan, nor has the high income to support it.
Microfinancing also assists in differentiating services for those who do not have a lot of money from those provided by formal banking institutions. Currently, about 160 million people in developing countries are helped by microfinancing institutions.
Women in developing countries tend to be at a higher disadvantage, especially when it comes to making money and securing opportunities in business. They do not have the same opportunities as those in the Western world where gender equity is more the norm.
Women in underdeveloped countries are in desperate need of resources that will not only empower them but help them engage in activities that produce income for both themselves and their families.
The Benefits of Microfinancing
According to the Consultative Group to Assist the Poor (CGAP), microfinance has assisted poor households in meeting their basic needs. Microfinancing and microloans have also improved household economic welfare and enterprise stability.
The economic participation of women has grown exponentially due to these financing services. This participation has empowered women, leading to the promotion of gender-equity and the improvement of household wellbeing in less developed countries.
Access to these types of financing programmes has allowed women to become more resilient. Not only do they become empowered to cope with unexpected circumstances, it also allows them to take advantage of economic opportunities.
With greater access to microloans and other smaller financial services, women are better able to plan and expand their own business activities.
Even more encouraging is that many women who have availed themselves of microfinancing have been able to take themselves out of poverty, making what those at Kiva.org calls the “transformation from every-day survival to planning for the future”. This opportunity is one that women in underdeveloped countries may never have had without the extra help that microloans provide.
Women who are provided with microloans have been able to use the money to raise their family’s standard of living and build their own small businesses, an opportunity that may have seemed completely out of reach before.
Institutions that provide microfinancing services have also found that this type of credit has had a positive psychological impact on women participants. Women are:
• More confident
• More assertive
• More visible in areas that do not allow for the free mobility of the female members of their society
• More able to negotiate, an extremely valuable business tool and skill
• Able to own assets, including land and housing
• Play a stronger, more integral role in decision-making.
Additionally, there have even been reports showing that well-established microfinancing programmes have seen declining levels of violence against women – a statistic we welcome.
Like anything else, microfinancing, microloans, and microcredit have their pitfalls. For example, it is important that women who use microcredit are able to generate income. Providing microcredit to those who cannot use the credit in a productive manner could end up having an effect opposite of what is intended.
Regardless, institutions that provide microfinancing to women in both developed and underdeveloped countries are helping to empower women and are turning a male-dominated business world into one that has more gender-equity.
The financial services provided to poor and low-income women have played a huge part in breaking the cycle of gender inequity when it comes to small businesses.