Women, Poverty and Microfinance: London conference

Progress for Women Is Progress for All

Aaron Oxley, Chief Executive of the organisation Results UK, was the opening speaker and he introduced some statistics to set the scene. 70% of the world's poor are female and in many countries property and inheritance laws are discriminatory, leaving women without a stable home or financial support if they are widowed. Aaron talked about the evolution of microfinance from its initiation by Nobel Peace Prize winner Muhammed Yunus, who founded the Grameen Bank 33 years ago, to the modern day. Today there are over 3500 microfinance organisations in the world and 84% of the borrowers are women. Half a billion people are now affected by microfinance which is indicative of the success of the movement.

Aaron explained that microfinance started as a system of offering small loans, £60 on average, to groups of people. The loans were not made on the basis of physical capital; the system relied on social capital through reputation and peer support. The focus is shifting to lending to individuals and personalised 1:1 services. New concepts have also been introduced such as microsavings, which gives poorer women a formal way of saving some of their earnings, and microinsurance, which offers financial protection in the event of the death of a spouse, sickness or natural disaster. Many microfinance organisations specifically target women because they are seen as a lower credit risk. Their activities are typically rooted in the family and the community whereas a man's lifestyle tends to be more transitory.

In highlighting the positives and negatives of microfinance, Aaron said that it contributes directly to the elimination of poverty, increases personal assets, and builds social confidence and status. Women tend to spend their extra income on things like education for their children which benefit the whole community. However, he warned that microfinance is not the complete answer. For example, the most poverty stricken areas in the world are rural and isolated regions which are difficult for microfinance organisations to access. There are also risks to agricultural industries, such as droughts, which may leave borrowers unable to repay their loans but the introduction of microinsurance, enabling people to buy ‘weather index’ derivatives, is offering better financial protection.

Inci Yalman, Director for Financial Institutions at Standard Chartered Bank, was the second speaker. Standard Chartered operates in over 70 countries and Inci talked about the Bank’s commitment to supporting microfinance initiatives across the world. They advise and partner local microfinance institutions in order to promote access to financial services for those without a bank account or who are not able to secure sufficient support through the mainstream financial sector. Inci also spoke about the Bank’s role as an intermediary, pairing up development organisations, such as UN agencies and Oxfam, with local microfinance institutions. She stressed that as the Bank does not have the expertise of these local institutions, the focus is on providing technical advice. However, in some countries the Bank does also lend money directly to small businesses. Standard Chartered has received several awards for its work in bringing microfinance into the mainstream and hopes more banks will follow. When asked if the Bank saw this programme as profitable, Inci explained that it was not profitable in the way that other aspects of the business are, but was seen as part of a long-term business development model in a number of countries.

The final speaker was Faisel Rahman, managing director of the social business Fair Finance. Faisel has nearly 15 years experience of what he prefers to call “dealing with financial exclusion” rather than microfinance. He pointed out that 10-15% of the British population are still without access to a bank account and cannot borrow from mainstream lenders. They tend to use “door step” and “payday” lending for emergency loans. These methods offer a seemingly quick-fix solution but interest rates are high and the market, estimated at £16 billion, is loosely regulated. There is therefore a need for microfinance schemes in the UK because so many are still financially excluded, unable to access the services that would give them a better deal and hindered by the stigma that those who are poor cannot save and are bad with money.

Faisel launched Fair Finance in 2005 and began lending small amounts of money to people in poorer communities in East London. His aim was to set up an ethical and socially responsible lender and to deliver a range of not-for-profit financial services, not just loans, to the excluded and exploited. Unlike a bank, Fair Finance offers loans on the basis of who someone is, not their financial history. They aim to help in tackling underlying money problems rather than simply offering a loan. 70% of loan approvals are to women as they are less of a credit risk and usually clearer about what they want. Fair Finance has supported over 5000 clients and is expanding to offer services over a much wider area. Faisel sees the positive impact of his business on clients as more than just an increase in disposable income and financial inclusion. On a personal level, clients feel empowered because they have more control over their money and more time to make informed choices, and their quality of life improves with less stress and anxiety.

The three excellent speakers stimulated a lively discussion at the end of the conference session about the successes and pitfalls of microfinance initiatives. This covered questions about the profitability of microfinance institutions, how far they can be self-sustainable, and the role of philanthropy in microfinance.

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