Microfinance: Women's Way Out

Imagine being an entrepreneur and trying to start a company without a bank -- no business loan to back you, no way to write or receive checks, no credit card for large purchases.

Starting a business without these supports is unfathomable. Yet this is precisely the challenge facing women entrepreneurs in developing nations. The World Bank reports that only one-third of the world's population has access to any kind of bank account. And the vast majority of those excluded from banking services are women. Women, according to the International Labour Organization, represent an estimated 70 percent of those living on less than $2 a day.

Conditions are harsh for impoverished people, but the struggles are particularly severe for women. In addition to the expected challenges -- inadequate nutrition, little or no access to health care and limited educational opportunities -- women are disproportionately victims of forced labor, domestic abuse and sexual violence. In many developing nations, women are not legally permitted to own property.

With challenges as profound as these, what does it take for a woman to succeed as an entrepreneur?

It takes uncommon courage and determination, and it takes people like you and me to invest in her.

Until recently, only 1 percent of all development dollars have gone to women. Fortunately, this is changing. Organizations and development programs such as the Bill & Melinda Gates Foundation and the Millennium Development Goals (a United Nations-backed initiative to improve social and economic conditions in the world's poorest countries by 2015) have an increasing focus on programs for women. Equally encouraging is the expanding importance of microfinance, a sustainable solution for helping impoverished women by investing in them.

A microloan can help women generate income. And with that income, they can feed their children more nutritious food, pay for their education, employ other women in the neighborhood and more effectively influence community policies that affect children and families.

In my work with Opportunity International, a microfinance organization, I have had the privilege of traveling to Africa and Latin America and meeting many of the women clients we serve. Each time, the experience is unfailingly humbling. My toughest-ever work experiences are nothing compared with the obstacles these women face every day. Despite the harsh environments and oppressive social and economic conditions in which many of them live, these resilient women are very clear about who they are and what they want. They demonstrate a strong and sustaining sense of purpose: to build and maintain their businesses so they may feed and educate their children.

When you meet such women and feel the power of their conviction, you want to do all you can to help.

"Women everywhere today are sensitive to the fact that they have this growing economic prowess," says former advertising executive Susan Gillette, a member of theWomen's Opportunity Network (WON). "It's easy for women in the developed world to look at a woman in the developing world and understand how microfinance can change her life."

Best of all, the change works both ways.

"It's not only empowering for the women receiving microfinance services," says WON member Betsy Perdue, a partner in an international law firm. "It's also empowering for the woman who is making a contribution to realize she can make such a profound a difference in the lives of other women."

Profound indeed. During a trip to Uganda, I was honored to meet Sarah Byamukama, who runs her secondhand clothing business from a tarp-covered stall in the sprawling Owino market. My first reaction was bewilderment: How could she possibly earn a living in a marketplace crammed with hundreds of nearly identical stalls? Yet this adaptive and tenacious entrepreneur was providing not only for her family but also for her extended family.

Even more remarkable than her success (however modest by our standards) was her story of what it took to get there. Before she became an Opportunity International client more than five years ago, Byamukama sold only one bale of clothing per week, and her husband struggled to pay school fees for their four children. Today, she sells 30 bales per week. Byamukama's home life has improved, her family eats good food, and her children are safe. She has built her own house and purchased a plot of land where she plans to build a two-story home and rental units. Byamukama has been able to help people in her community by sharing some of her profits, buying goods from them and lending them money when they need it. Seven of her older brothers and sisters have died from AIDS, and she cares for their children. She dreams of the day when she will import large containers of secondhand clothing to sell in the market.

In 2009, a fire tore through the Owino market, destroying 300 client stalls, including Byamukama's. While many others around her lost their businesses and the gains they had made toward a better future, Byamukama was insured by Opportunity International. The insurance covered her loan repayment, and, after a month's time, she got a new loan so she could start up again. Byamukama's business has made great gains since then, and she has many new customers.

Since then, Byamukama has encouraged other vendors to join an Opportunity Trust Group so they, too, could rebuild their businesses and be protected from future disasters. In aTrust Group, Opportunity International's community-based lending model, anywhere from 10 to 30 (mostly women) entrepreneurs elect leaders, receive business training and pledge to guarantee each other's loans.

The key to the success of the Trust Group is women championing not only each others' financial goals but their business skills, morale, and belief in better futures for themselves and their children. Those of us who invest in women hope that providing them with access to financial services, insurance and training, plus the community and support of the Trust Group, gives them a greater sense of security and purpose in the volatile, often violent societies of the developing world.

That which makes a community strong in Uganda makes for a strong community anywhere: the effective nurturing and education of children. In most parts of the developing world, it is women who put the greatest value on educating children. Accordingly, WON supports aBanking on Education campaign to provide loans to entrepreneurs to expand neighborhood schools for children living in poverty. This is particularly good news for women. Studies by the Nike Foundation, which invests in adolescent girls in the developing world, have shown:

  • When a girl receives seven or more years of education, she will marry four years later and have 2.2 fewer children.
  • When 10 percent more girls go to secondary school, the country's economy grows by 3 percent.
  • When women have the skills to participate in public life, government corruption declines.

With statistics such as these, it's no surprise that for women living in poverty, education is a top priority. "Educating their children is the first dream women speak about," says WON member Julie Hindmarsh, a clinical instructor at Johns Hopkins School of Nursing. "Women entrepreneurs who are able to educate their daughters are the hope of Africa. Their values of working together in the community for win-win situations could transform the entire continent."

Hindmarsh and I were part of a group of mothers and daughters visiting Uganda who spent time at Rise and Shine, a school established by Dorothy Tendero that educates more than 120 children and provides them with nutritious lunches. Like most Opportunity-funded schools, Rise and Shine had humble beginnings. When Tendero's mother died, she converted the family home to a small school that grew with the aid of Opportunity loans.

Tendero, a model of the community-minded woman entrepreneur, gives back by offering subsidized tuition for the children of Congolese, Sudanese and Somali refugees.

Another generous Ugandan, Mariam Noah, is the proprietor of Ladybird Infant Primary School. With a combination of microloans and profits, she has been able to expand her school, which now employs 18 teachers and educates 411 students -- more than half of whom are girls. Like Tendero, Noah makes it possible for the most vulnerable in her community to receive an education. She provides free education for 30 orphans, some of whose parents died of AIDS.

Rosemary Namande's success is no less inspiring. Affectionately known as Mama Rosemary, the Ugandan entrepreneur has watched her once-makeshift school grow to five permanent buildings serving more than 900 children -- many with discounted or free tuition. Fifteen of her school's current students were born with AIDS and receive treatment at her school.

Tendero, Noah and Namande are among the rich legacy of change agents who confirm the Nike Foundation's findings that when family needs are met, women are more likely to invest in their communities. In fact, in all of the published studies on the financial empowerment of women -- from UNICEF to the World Health Organization -- the conclusions are the same: When you invest in women, everybody wins.

Ruth-Anne Renaud is vice president of women's philanthropy atOpportunity International, which provides microfinance loans, savings, insurance and training to more than 2 million people working their way out of poverty in the developing world.