Issue - June 2010



June 2010

Editorial

In this edition Lauren Rutter reviews the UPB's theatre production Dr. 0; CBA students highlight ways to solve the garbage problem in the city; Floriane Guyot discovers how micro financing can help to empower women; Jaime Bassett explains about sustainable development week; Rocio Carranza looks at why richer nations should take responsibility for climate change and Walter Sanchez uncovers the history of band music in the Valle Alto. read more...

June 2010

Empowering women through microfinance

Floriane Guyot gives some details about microfinance and explains how some organizations like Pro Mujer help poor Bolivian women to empower themselves.

Floriane Guyot
Projects Abroad
Volunteer
Nantes - France


Bolivia is one of the poorest countries in South America. Even if there is not a miraculous remedy to eradicate poverty, microfinance has done a lot to alleviate the plague from several decades. Bolivia has been one of the pioneers in this field since the 80’s. Microfinance is the provision of financial services to low-income clients, including consumers and the self-employed, who traditionally lack access to banking and related services. In recent years, the idea of giving small loans to poor people became the darling of the development world, hailed as the long elusive formula to propel even the most destitute into better lives.  Muhammad Yunus, the economist who pioneered the practice by lending small amounts to basket weavers in Bangladesh, won a Nobel Peace Prize for it in 2006. The idea even got its very own United Nations year in 2005. In the well-known words of Yunus, “poverty is unnecessary” (Yunus), and microfinance can help the poorest of the poor around the world earn the extra amount of capital needed to get on the on the ladder of development. Microfinance is not charity or dependency and recognizes that helping people help themselves can create a world of difference in the fight against global poverty.

Microfinance is a proven strategy for reaching poor women in particular and empowers them. Empowerment is about change, choice and power. It is a process of change by which individuals and groups with little or no power gain the power and ability to make choices that affect their lives. Microfinance targets especially women because evidence shows that they are less likely to default on their loans than men. Women often face discrimination and cultural barriers simply because of their gender. Most of them work in the informal sector as vendors because they do not have any other alternative. Nevertheless gender equality turns out to be good for everybody. The World Bank reports that societies that discriminate on the basis of gender have greater poverty, slower economic growth, weaker governance, and a lower standard of living.  Simply getting cash into the hands of these women leads to increased self-esteem, self-confidence; control and empowerment by helping them achieve greater economic independence and security, which in turn gives them the chance to contribute financially to their households. Because women contribute decisively to the well-being of their families, investing in women brings about a multiplier effect.

There are a lot of types of microfinance institutes (MFI´s): formal banks, NGO’s, etc. In most of them, microfinance has also been combined with business, health and women´s general education; literacy, business and empowerment training. All of these services are packaged with financial services in a way that can create powerful synergies.

Let’s have a better knowledge of one of the MFI’s acting here in Bolivia and specifically in Cochabamba: Pro Mujer.  Pro Mujer, founded in 1990, is a non-profit microfinance institute and an international women's development organization whose mission is to provide Latin America's poor women with the means to build livelihoods for themselves and futures for their families through an integrated package of sustainable financial and human development services. It offers credit and training programs geared to the needs of poor, undereducated women who either operate a small business or would like to open one. Their clients are engaged in small income-generating activities such as food processing, shopkeeping, street vending, sewing and weaving, among others.  People living in poverty do not have access to credit services because they lack the ability to provide formal guarantees required by banks. So, when poor people borrow, they often rely on relatives or a local moneylender, whose interest rates are very high, and they often remain with debts all their lives. Since 1990, when Pro Mujer began operations in Bolivia, it has replicated its successful model in four other countries in Latin America:  Nicaragua, Peru, Mexico, and Argentina.

Here is the way it works for borrowers as a group.  Pro Mujer provides women with working capital loans ranging from US$50 to $1,500 with a term of four to six months. Women who repay their loans on time qualify for larger loans. Women self-select into groups of 18 to 28 and form a communal bank, which requires them to guarantee each other’s loans. If one woman cannot meet her weekly payment, group members make the payment on her behalf and she reimburses them as soon as she can. Because responsibility for repayment rests on the group, there are very few late payments. The communal banks meet regularly in neighborhood centers where they repay their loans, make deposits into their savings accounts  (voluntary savings, and compulsory savings of 20% of their loans as a buffer against emergencies such as an illness or natural disaster), and receive ongoing training sessions in business development and good health practices. Indeed, Pro Mujer equips women with more than just credit. It also arms them with the business know-how and skills they need to thrive as entrepreneurs.  It is all about helping women to believe in themselves and reach their full potential as entrepreneurs. Physicians, nurses and trainers provide basic health education focuses on preventing common illnesses and raises women’s awareness of the importance of primary health care during times set aside before and after repayment meetings to discuss nutrition, hygiene, pre-and post-natal care, family planning and other reproductive health topics. In Bolivia the staff offers medical services like breast exams, STD screenings and pre- and post- natal care for pregnant women.  As for empowerment, a key to ending poverty and creating more just societies according to Pro Mujer, women are taught about domestic violence, communication skills, and women’s rights. There are as well nurseries put in place when the women attend the repayment meetings, and acenter with computers available for them to learn basic computer skills.

Some limitations are also raised when it comes to microfinance: many of those receiving microcredit also used the loans to supplement the family income. Microfinance doesn´t reach the poorest of the poor, problem of clients who borrow multiple loans from different organizations and after run away; and the inexistence of a system to track them. There is no transparency between MFI’s, they don’t share information about their clients and don’t want to do so because of the competition. However, despite those limitations, microfinance can be a real tool for development if circumstances permit it. Economical opportunities, a network of telecommunications, transports, electricity, in a few words, a market for the products of entrepreneurs are needed. Microfinance is an effective complement when all these previous conditions exist.

Microfinance gives very poor women a chance to improve their lives and the lives of their families. By bringing women together and encouraging them to recognize their value and claim their rights, it helps them gain the confidence and self-esteem to start and develop small businesses, take better care of their health and the health of their families, and take on positions of leadership in their communities. Results are really encouraging, and the successful stories are numerous, microfinance linked to others factors like education, health, telecommunication and existing market can really make the difference in the fight against poverty and the empowerment of women. Microfinance is not a “magic bullet for underdevelopment” (Kingsbury), but it is an important part of the new development equation. The supply in this field is permanent and still high. To be continued.

Alianza Francesa au support de l’alliance vert

Sustainable development week is organised by Alianza Francesa along with a number of other institutes, ranging from the Palacio Portales to FundaciĂłn Gaia Pacha. They will be hosting a number of events and activities, from workshops to films, from art exhibitions to competitions, to try and raise awareness about sustainable development and the issues involved.

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