Inflammation and stories on Microfinance

Known for its tropical vistas and banana plantations, Costa Rica has also developed a well-deserved reputation for stability. Indeed, since abolishing its military in 1949, the small Central American nation has celebrated seven decades of uninterrupted democracy. While this stability has allowed Costa Rica to make great strides in alleviating poverty, however, nearly 21 percent of the country still remains impoverished. To this end, many in Costa Rica are increasingly turning to microfinance as a potential remedy.

Why Microfinance?

Microfinance is a banking service that focuses on delivering small loans to communities underserved by traditional banks. These ‘microloans’ can be as low as $100 and are specifically designed to help meet the needs of low-income families.

Because the principal of a microloan is much smaller than that of a traditional loan, lenders can afford to take on risks they otherwise could not. This means less stringent requirements on things like documentation and property, which are traditionally the largest obstacles to acquiring credit for those living in poverty. As a result, microfinance has become a favorite tool of activists in the developing world.

Costa Rica is no exception in that regard. With more than half of Costa Ricans unable to raise needed funds in an emergency, microfinanciers provide the country a crucial service.

Keeping Small Farmers and Rural Communities Afloat

One reason microfinance has been able to take off so quickly in Costa Rica lies in the country’s history. In the 1980s, a prolonged economic crisis prompted traditional banks to retreat en masse from Costa Rica’s rural areas. This left many small farmers suddenly lacking access to badly needed credit.

To help combat this issue, organizations like FINCA began seeking ways to encourage sustainability in rural financial markets. One such solution was microfinance.

Beginning in 1984, FINCA Costa Rica set about building a series of ‘village banks’ in the areas hit hardest by the loss of financial services. These were largely community-run, shared-liability ventures whose purpose would be to offer microloans to farmers. It did not take long for the model to become a success. Village banks quickly began to attract Costa Rican farmers, many of whom would have had difficulty acquiring a standard loan. In fact, the village banks would prove so popular that within a decade they had already become self-sustaining.

Others in Costa Rica soon took note of FINCA’s success. Though not all would copy the village bank model, many other microfinancing operations began to sprout up around the country.

Empowering Costa Rican Women

While FINCA’s village banks primarily served a demographic consisting of rural, male farmers, modern microfinanciers pursue a more diverse client base. Women in particular are a focus for many.

Research demonstrates a sharp gap in financial access along gender lines in Costa Rica. Thirty-nine percent of Costa Rican women lack a bank account, for instance, compared to 25 percent of men. This is a pattern that largely holds consistent across the developing world. Although in many cases women provide necessary income for their families, they often lack the means to build upon those earnings. This leaves them more vulnerable to the sudden economic shocks that can devastate a household, like personal medical emergencies and unexpected changes in consumer trends.

Microfinance institutions empower these women, however, by offering them the credit needed to start a business of their own, and by providing them with a newfound resiliency.

Thanks to the efforts of organizations like Fundación Mujer, women now own more than 22 percent of Costa Rican businesses. And, as the number of women gaining access to loans and other financial services increases, that percentage is only expected to grow. This means greater social mobility for Costa Rican women and a stronger ability to weather the storm in times of crisis.

The Future of Microfinance in Costa Rica

Microfinance in Costa Rica has come a long way from its first experiments with village banks in the 1980s. As it stands, Costa Rica is now one of the world’s largest microfinance markets. And, with the industry expected to grow by a further 5-10 percent in Latin America over the next decade, it is unlikely that will change any time soon.

While experts caution that microfinance cannot be seen as a ‘miracle cure’ for poverty, it is undeniable that it can provide real benefits to those in need. To see that, one only has to consider the success of microfinance in Costa Rica.

– James Roark

Photo: Pixabay.com

Microlending Organizations
In the fight against global poverty, one hot-button issue is how to provide aid without the implication of paternalism, the idea that one person or group knows the interests of another group better than that group knows its own interests. Tariq Fancy, the founder of the nonprofit The Rumie Initiative, recalls hearing a Kenyan relative’s view on problems with international aid, saying “don’t walk in assuming that from your perch in North America you figured out all the answers for Africa.” Putting resources and power in the hands of communities both provides aid and acknowledges that they can make decisions about local interests. Microlending organizations have the power to do just that

Microloans are small loans at low-interest rates. Individuals living in poverty often have difficulty securing loans from traditional financial institutions due to a lack of borrowing history and assets to use as collateral. Even when people can get loans, interest rates are often high. People often use microloans to finance small businesses in their early stages, enabling people to overcome barriers and progress toward lifting themselves and their families out of poverty.

Microlending organizations can also issue loans for community projects, like building wells or funding schools. Microlending organizations typically, but not always, issue loans funded by individuals rather than by banks or other financial institutions. Here are four companies and organizations that use microlending in different forms to empower people living in poverty.

Four Microlending Organizations that Empower the Poor

  1. Kiva: Kiva crowdfunds loans from people around the world and uses partners to issue them. The nonprofit has enabled the funding of more than $1.33 billion in loans. Kiva emerged in 2005 and has partnerships with financial institutions throughout the world, where it transfers the crowdfunded money. The local field partners then loan money to Kiva’s lenders. Kiva has a 96.8 percent repayment rate and operates in 78 countries. On Kiva’s website, lenders can sort loans by region or category, such as agriculture, women and eco-friendly.
  2. Zidisha: Zidisha is the first direct person-to-person microlending service that focuses on entrepreneurs and job creation. Its name” comes from the Swahili word meaning “grow.” Unlike Kiva, Zidisha does not loan through financial institutions but facilitates direct lending between people. Zidisha’s loans total more than $16 million and have financed more than 240,000 projects.
  3. Building Resources Across Communities: Building Resources Across Communities (BRAC) is the largest non-governmental development organization in the world in terms of number of employees. Hasan founded BRAC in 1972 and it employs more than 120,000 people in 11 countries. BRAC has a microfinance program, primarily in Bangladesh, which has loaned to 5.6 million borrowers, 87 percent of whom are women. Unlike Kiva and Zidisha, which operate person-to-person lending services, BRAC distributes loans to lenders on its own using donations and other funds. BRAC also does work unrelated to microfinance, investing in schools and in water, hygiene and sanitation services.
  4. Women’s Microfinance Initiative (WMI): Women’s Microfinance Initiative (WMI) began issuing loans in 2008 and trains local women in managing loan hubs. WMI has loaned more than $4.5 million to rural women in amounts of $100 to $250 at an interest rate of 10 percent. According to WMI, 99 percent of its borrowers report doubling their income within six months of being involved in the program. WMI reports a 98 percent repayment rate.

The efficacy of microlending in pulling people out of poverty is up for debate, but some cases have shown promising results. A microfinance program in Uzbekistan resulted in 71 percent of participants reporting an increase in food intake quality. One study showed that when a microfinance program was put in place, there was an 18 percent decline in extreme poverty. While different studies report differing results, microlending organizations like Kiva, Zidisha, BRAC and WMI have certainly been a success.

– Meredith Charney
Photo: Flickr

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The continent of Africa has experienced exponential growth in the last few decades, which has attracted attention and investment from several multinational firms and corporations. International corporations such as Facebook and Google have then concentrated on accessing this booming market of newly prosperous consumers. The World Economic Forum has recorded the astronomical growth of African markets and outlined a very optimistic economic trajectory for many of its developing nations.

Growth and Debt

The Forum’s findings revealed that the “continent demonstrated an average real annual GDP growth of 5.4 percent between 2000 and 2010, adding $78 billion annually to GDP. Growth continued at 3.3 percent from 2010 to 2015.” A major reason why Africa experienced these high levels of growth is the recent influx of microfinance institutions providing affordable loans to farmers across the continent.

Farming is the primary source of food and income for Africans and provides up to 60 percent of all jobs on the continent.  Microfinance institutions have tailored their lending to this fact and the results have been extremely beneficial for both the farmers and firms themselves.

The loans give African farmers the opportunity to invest in profit-generating activities that improve their economic security and access the most important benefits of microfinance institutions in Africa. Activities such as providing better food for their families, improving access to clean drinking water and sanitation, and enrolling their students in school instead of work have all driven the impressive growth rates on the African continent.

Benefits of Microfinance Institutions in Africa

The benefits of microfinance institutions in Africa also extend to the lenders and their companies. The microfinance industry in Africa currently has a gross loan portfolio of $8.5 billion and attracts a consumer base of 8 million people. According to Mix Market microfinance institutions’ data, the African continent has developed one of the fastest-growing MFI bases.

This gross loan portfolio and base of African microfinance institutions continue to grow and has witnessed an exponential growth of 1,312 percent between 2002 and 2014. The farmers themselves have excellent repayment rates despite the daily hardships they face, which continues to foster growth in the African microfinance industry.

The mutually beneficial partnership between these microfinance institutions and African farmers and the continuing innovation from both sides has helped foster growth in several African countries. In fact, a perfect example of such interaction and progress can be found in the nation of Mali.

Mali

In Mali, microfinance institutions began offering an innovative loan product tailored to farmers’ seasonal cash flow. The results of this new product were outstanding for both the firms and the farmers.

The households offered these loans saw an increase in investment on agricultural inputs such as fertilizer, herbicides and insecticides; this led to an increased value of agricultural output by $32 and value of livestock by $168. The repayment rate among those that took out loans was perfect, which ensured profits for the lending institutions as well.

Room for Improvement

While microfinancing has been an overall beneficial lending practice, there are still some challenges to overcome. The predominant issue that needs to be addressed is increasing access to rural communities. Some 70 percent of the population in Sub-Saharan Africa lives in rural areas, where financial services are scarce.

This issue is compounded by the areas’ lack of infrastructure to help microfinance institutions reach them. Microfinance institutions must continue to expand their operations in Africa in order to maximize its benefits and keep Africa on its current growth trajectory.

– Anand Tayal
Photo: Flickr

Essential Financial Tools for Small and Medium Scale Businesses
Businesses drive the economic and overall growth of a country, and strong and thriving businesses generate income, employment opportunities and support families. In fact, these groups constitute the core of a nation’s socio-economic development.

In a developing country, this valuable contribution is made predominantly by small and medium scale businesses. Experts agree there are two essential financial tools for small and medium scale businesses in a developing economy:

  1. Micro-loans
  2. Insurance

Together these two financial tools can bolster the steady growth of a business and insulate it against unforeseen circumstances such as bad weather and unfavorable market conditions.

Micro-Loans

Micro-loans are a fundamental tool for small and medium scale businesses. Micro-loans are small amounts of money borrowed from a bank or a financial institution which can be returned in minuscule monthly installments over a few years. Depending upon the borrower’s income, the installments can be as low as a few cents a month.

Often, there are no additional charges involved. “I’ve worked in microfinance long enough to know that late fees create a cycle of debt,” says Matt Flannery, founder and CEO of Branch, a mobile lending platform that remotely transfers money ranging from $2 to $500 to bank accounts of poor small-scale entrepreneurs in Kenya. Like Branch, many other startups in the developed world are contributing to the success of mushrooming small and medium scale enterprises in developing nations around the world.

The significance of these financial tools for small and medium scale businesses has been reinforced through various initiatives of the World Bank as well. In Turkey, a World Bank project helped expand the export capacity of small and medium scale businesses through micro-loans worth $1.7 billion in Export Finance Intermediation Loans. The project report showed that participating companies introduced new products, increased exports and benefitted sales and employment significantly.

Insurance

The second among the financial tools for small and medium scale businesses is insurance. Insurance creates a safety net for a businesses, and in case a business isn’t as successful as initially perceived, insurance can be used to pay off debt. Insurance thus provides an opportunity for the entrepreneur to avoid the vicious cycle of poverty, and is also proven to encourage risk-taking and improve business competitiveness.

A recent report published by the World Economic Forum stated that one in three people in Latin America lives in an area threatened by frequent floods and climate change. In countries like Mexico, Puerto Rico, Peru and Guatemala, insurance is the most effective financial tool for small and medium scale businesses.

Success vs. Failure

Public-private partnerships in many Caribbean countries provide risk cover against earthquakes, hurricanes and other natural disasters. Recently the World Bank issued sustainable development bonds to Chile, Columbia, Mexico and Peru to provide comprehensive insurance covers worth $1.36 billion against earthquakes.

These two financial tools can mean the difference between success and failure for many businesses. Increasing access to micro-loans and insurance in developing countries can help businesses grow and expand, resulting in many more people being lifted out of poverty.

– Himja Sethi
Photo: Flickr

credit access in the central African republicSince its independence from France in 1960, the Central African Republic (CAR) has faced adversity in growing its economy. While poverty plays a significant role in the region’s struggles to achieve food security, safe sanitation and shelter, a lack of credit access in the Central African Republic is another main contributor.

Obstacles to Credit Access in the Central African Republic

Making Finance Work for Africa (MFW4A) states that the weaknesses in the CAR’s financial sector have held back its economy, as it contributes only 17.6 percent to the country’s GDP. The inadequacy of services also makes it difficult for people to access loans or other banking services that could be helpful in their businesses or personal lives. To help the CAR’s citizens improve their quality of life, increased credit access in the Central African Republic is crucial.

CAR’s financial services have been relatively stable, but the sector is considered fragile due to deficient bank loan portfolios and inactive loans, known as non-performing loans (NPLs), which account for 30 percent of all loans in the CAR. The sector also has an above average percentage of loans to the public sector, making it vulnerable to losses due to government instability.

To help address these issues, the International Monetary Fund approved a disbursement of $40.2 million and an augmentation of $55.1 million to the CAR in 2017 as part of the Extended Credit Facility Arrangement. The funds will be used to support economic growth and develop the banking sector. According to Deputy Managing Director and Acting Chair Mitsuhiro Furusawa, the CAR’s program consists of “improving regional institutions, stricter monetary policies, removal of statutory advances, sound bank regulation and supervision, and firm controls over the extension of credit to banks.”

Bringing Credit to Individuals in the CAR

A more direct way of aiding impoverished families is through the Mercy Corps project Microfinance in the CAR, which launched in 2010. The project’s mission is to produce, educate and assist 169 Village Saving and Loan Associations (VSLA). The project was also created to assist in constructing supervision strategies, insurance funds and credit policies. The project’s answer to the CAR’s issues is to educate the VSLA groups to practice saving and credit strategies during the members’ first nine-month loan and savings cycle. Its long-term goal is to help 3,300 households by expanding the groups’ assets in developing and overseeing independent businesses to gross earnings.

In recent years, credit access in the CAR has been made possible through a microfinance program established by the U.N. Development Programme (UNDP) for entrepreneurs developing businesses. The UNDP opened a saving bank called Gogoro that gives users the opportunity to save money securely. Severin Saragourne, an entrepreneur and a user of Gogoro, said, “If you borrow wisely and respect the deadline for your program, you’ll have no problem paying the money back.” The micro-credit program has saved many people from poverty and starvation in the CAR. Through Gogoro, more than 49,000 people in underdeveloped nations have received access to credit, savings and other financial services to overcome poverty.

Another sign of progress in financial services is the UNDP’s project with the Leaders of the International Centre of Credit Unions, which made magnetic cards available for all transactions in 2011. Even with the obstacles the CAR has struggled with, the region shows promise in improving its financial sector and resolving the limitations of credit access in the Central African Republic.

– Christopher Shipman

Photo: Flickr

Credit Access in Iraq
There is a plethora of obstacles to overcome when examining the aspects of financial stability in the Middle East, and Iraq in particular. Iraq has an institution called CHF Vitas Iraq geared towards restoring the economy and producing monetary growth in the nation.

Forming a Solid Foundation

“In Iraq, for example, only 11 percent of adults hold an account at a formal financial institution.” CHF Vitas Iraq is doing a tremendous job of, “offering financial services to families and the owners of micro and small businesses, and by supporting homeowners in home improvement and restoration.”

This type of commitment can not only better the lives of the individuals receiving credit access in Iraq, but can also provide the groundwork for an ever-changing economy in the future.

The work CHF Vitas Iraq has invested into the community is incredible. The organization continues to promote and support small businesses as well as supply aid to the region. “They are a subsidiary of Global Communities, which is a non-profit development organization that partners with local stakeholders across a range of topic areas.”

Micro-financing Changing Iraq’s Landscape

In fact, “since its inception, CHF Vitas Iraq has become the largest microfinance institution in Iraq with the largest market share, disbursed more than $1 billion in loan capital, grown an outstanding portfolio of more than $74 million (as of August 2017) and maintained a 98 percent on-time repayment record.”

With the assistance provided by this group, citizens are becoming increasingly stable and proud of themselves as they now have both the purpose and ability to follow their dreams. Aid and assistance comes at a great time for Iraq since they have been experiencing much conflict over the past several years.

The Overseas Private Investment Corporation is working to issue relief in the areas of Iraq that are dealing with the most conflict.

Positive Results of Credit Access in Iraq

There was a survey implemented in the region that represented credit access in Iraq for the population, and “the survey revealed a significant gap between Iraqi citizens who borrowed formally (4 percent) and those who did so informally (65 percent).”

When one notices the impact credit has on people’s lives, it allows a better understanding of how difficult it is to live without access to such a resource. Many Middle Eastern countries do not have a well-developed financial system, so with the ability for these loan companies to provide credit access in Iraq for a majority of the citizens, there can only be positive results on the monetary factors of the economy.

There is still much that needs to be accomplished for this country to become more stable in an economic aspect as well as maintain strength to persevere during conflict. But, if ISIS can be controlled and micro-finance loans can continue to be distributed in a proper manner, then credit access in Iraq will produce many opportunities for the citizens and hopefully lead to a stronger economic system.

– Matthew McGee

Photo: Wikimedia Commons

Access to Credit in MadagascarAccessing one’s credit can be a difficult task when there is not much information provided on how to do so. Madagascar has a plethora of farmers due to its vast landscape, and agricultural production could be greatly altered in a positive way if the MFI, or Microfinance Institution, was able to offer accommodating microfinance loans.

According to a report from the University of Göttingen, “agricultural firms with flexible microfinance loans have significantly higher credit access probabilities than non-agricultural firms and agricultural firms with standard microfinance loans.” Access to credit in Madagascar can be greatly improved by supplying the population with particular loans that allow them to enhance their financial stabilities.

Access to microcredit has a profound impact on Malagasy people. As The Guardian writes, “Microfinance is seen as a vehicle to help Madagascar attain some of its millennium development goals, particularly on eradicating extreme poverty.” Approximately 85 percent of the nation’s population lives on less than $1.25 a day. Credit availability in Madagascar has been able to create severe advancements for small businesses and provide a higher income for the average Malagasy family.

Since most individuals are without access to credit in Madagascar due to their financial status, providing goods for the family and bringing in a steady income can be very difficult. Many rely on informal moneylenders who charge annual interest rates anywhere from 120 to 400 percent for unsecured loans.  These numbers are astronomical compared with the MFI’s average rate of 36 percent for the same period, equating to two to four percent a month.

Extremely high interest rates can be very dangerous for people who do not make enough money to continually make payments every month. Supplying the Malagasy citizens with microfinance loans would give them the opportunity to discontinue their relationships with informal moneylenders and ultimately save additional money for other necessary goods.

However, a country that mainly relies on farming can be slightly strenuous for the MFI. It can provide the people with loans to help supply their agricultural needs, but when the weather does not cooperate with the proper farming conditions, these loans can then be used for other purposes. This is what the institutions do not want to happen. According to Serge Rajaonarison, Chief Executive Officer of the Caisse d’Epargne et de Crédit Agricole Mutuels de Madagascar, by accurately determining the “areas and farmers affected by hailstorms, for example, we can subsequently compensate according to the losses caused.”

The prime concern for the MFI is for its loans to be paid back by the people of Madagascar. Even after the country is devastated by severe weather events, the MFI continues to obtain its money back from those who were given loans. Continued payments by the people and being able to provide a better life and workplace for the community will allow the MFI to implement a strategy that will give everyone access to credit in Madagascar.

– Matthew McGee

Photo: Flickr

Credit Access in Niger

In today’s economy, credit access is a necessity. Credit access in Niger, however, has been a struggle in recent years. Individuals and businesses need it to sustain themselves and use registered credit to increase buying power. Without it, people are often exposed to predatory lenders who will abuse the power of the loans. For low-income communities, credit access can provide hope in the economy by providing citizens the opportunity to build a credit history for themselves. 

Niger doesn’t offer sufficient credit access for its communities, forcing them to use personal savings to sustain businesses. This often means their only savings go back to the production of more profit to be used for maintaining their business, not to sustain their household. The cycle of earning just the minimum to sustain the small business forms and doesn’t allow for the businesses to grow. Additionally, the smaller the business, the less likely it is to apply for and receive a loan.

One of the biggest struggles for credit access in Niger is geography. The country’s population is low in density and there are large distances between communities, which hinders access to microfinance institutions. The distance and cost of transportation make it impossible for some individuals to gain credit access. Some can not even afford a viable way to get to the institution without spending a sufficient amount of their household income. The need for multiple visits doesn’t help the situation.

The correlation between distance and access to credit institutions in Niger can not go unnoticed. Of adults living in rural areas, only seven percent have access to a bank account. Less than two percent of Nigerians had taken out a loan as of 2014.

Niger’s rural areas, business types and economy also factor into its underdeveloped classification as a country. Credit access in Niger has been very timid for agriculture and other industries on the rise, such as technology and media. However, there have been recent initiatives to help the lack of credit access in Niger.

BAGRI, a public agricultural bank in Niger, and SOS Faim have been trying to implement certain experiments and programs to address the ongoing problem of credit access in Niger. SOS Faim led an experiment in 2015 where it analyzed four cases in Niamey. The experiment aimed to better understand credit management strategies of farmers, identify support requirements and come up with possible solutions. What is needed now is more research and economic evidence to start and find a real solution to a problem that has been affecting Niger’s economy on a higher level.

– Elisa Martinez Cancino

Photo: Flickr

Credit Access in Cambodia
In recent years, cooperation between financial institutions and the Credit Bureau of Cambodia (CBC) has made credit access in Cambodia easier. Currently, 49.9 percent of individuals in Cambodia have access to credit. Credit coverage in Cambodia covers 5,059,897 individuals, and in 2017, the country came in seventh in the World Bank’s “Ease of Doing Business” ranking under “Getting Credit,” a category which measures credit information sharing and legal rights of borrowers and lenders.

“We are very proud our activities have allowed Cambodia to improve its position in the World Bank’s ranking, particularly when it comes to securing credit,” stated Oeur Sothearoath, the CBC’s CEO. The CBC is Cambodia’s leading provider of credit information, analytical solutions and credit reporting services to banks, microfinance institutes, leasing companies, credit operators and consumers in Cambodia. It provides the tools needed to analyze and reduce credit risks and, even more so, increase transparency in providing credit.

The deputy governor of the National Bank of Cambodia (NBC), Neav Chanthana, has also agreed that the work of the CBC has allowed borrowers more extensive and faster access to credit, noting that the new World Bank rating has already been able to attract new investors into the country. She further applauded the CBC, stating how its achievements reflect the development of the country’s financial infrastructure, with improvements to the credit information system being vital for customers and the financial sector.

The NBC, along with the Association of Banks in Cambodia, the Cambodian Micro-finance Association and the International Finance Corporation, all have been strong supporters of the establishment of the CBC. The CBC, in response to the demands of the National Bank, plans to run a fair, transparent and well-managed credit market which would support economic growth in Cambodia.

Credit access in Cambodia has continued to improve since programs launched in 2010, making credit for agribusinesses more accessible. Cambodia’s agribusiness sector plays an essential role in aiding the country’s economic growth, poverty reduction and job creation. This financial program has been a collaborative effort between the Royal Government of Cambodia, the International Finance Corporation and the International Development Association.

By guaranteeing that 50 percent of the loans extended by participating banks and microfinance institutions extend to this sector, the program aims to mitigate the default risk banks face when lending to Cambodian agribusinesses. This improved access to finance for agribusinesses has provided strong support to the country’s economy, with agriculture accounting for one-third of the country’s GDP and employing around 70 percent of the population.

Further data is provided by the World Bank with its Credit Information Index which measures the scope, access and quality of credit information available through public registries and private bureaus. The index includes a variety of indicators whose values indicate the amount of credit information available.

The “strength of legal rights index,” on a scale from zero to 12, measures the degree to which collateral and bankruptcy laws protect borrower and lender rights, and “credit bureau coverage” indicates the number of individuals and firms listed by a private credit bureau with information on their borrowing history. The country scored 10 and 49.9 percent.

Credit access in Cambodia over the past few years has increased in strength and size. With continued improvements being made in credit access, positive changes should continue to be seen in Cambodia’s businesses.

– Ashley Quigley

Photo: Flickr

Digital Finance is Empowering Women in Bangladesh

Recent innovation in digital finance is empowering women in Bangladesh by meeting their unique financial needs and capabilities. While 90 percent of Monetary Financial Institutions’ 21 million clients are women and 35 percent of Bangladesh women hold a bank account, women make up only 18 percent of digital finance users in Bangladesh.

Some of the barriers that hinder the inclusion of women in digital finance are low mobility, cultural barriers in male-dominated markets and English illiteracy incompatible with English-language phone menus. Women in Bangladesh also face low financial literacy, so they require guidance and training in order to benefit from increasingly more prevalent mobile-based platforms.

In addition, members of a typical household in low-income countries share one mobile phone. So, it makes sense that more than just having a registered mobile money account in her name is necessary in order for a woman to be financially included in Bangladesh.

Most low-income women in Bangladesh currently turn to insecure and informal saving mechanisms like keeping emergency funds stashed at home, buying excess stock for their business, using clay money boxes  or working with neighborhood savings groups. This puts their savings at risk of loss due to natural disasters or theft. It is no wonder, then, that it is difficult for women to save money for their futures, to pay school fees, to attain loans and to afford healthcare and insurance.

Saving money is particularly important to women. In Bangladesh, since women are dependent on their male spouses to provide for their families, they lack a safety net if their husband dies or abandons them. This makes women more vulnerable to health risks and death than men.

One innovation through which digital finance is empowering women is the human-centered designs financial service providers have been developing that are more intuitive, easy-to-use and affordable. The Bangladesh Rural Advancement Committee, an organization devoted to alleviating poverty by empowering the poor, started a training program for women in remote areas to learn how to handle mobile money.

Some other efforts that address the digital inclusion gap are:

  • Dutch-Bangla Bank Limited’s signing with 245 garment factories to distribute salaries to garment workers (mostly women) with accounts through agents, ATMs and client-initiated mobile transactions.
  • The Asia Foundation’s new program that will assist women entrepreneurs in using digital financial services and in using e-commerce to reach new markets.
  • Swosti’s new “mobile credit card” for depositing money and withdrawing emergency loans.
  • Grameen Bank’s creation of the concept of microcredit to be used by low-income women.

Some potential improvements that have been suggested further demonstrate how digital finance is empowering women. Some of the propositions include promoting government transfers and increasing the access women have to registered accounts by changing identity requirements and allowing for one-to-one interactions with women agents and sales representatives to improve communication and prevent harassment.

Other suggestions include making additional banking services that improve financial security for women available such as loan payments, insurance and long-term savings. Digital savings accounts would enable women to save small amounts of money as frequently as they want. It has also been suggested to make use of various channels of accessing finances to simplify the interface of mobile finance platforms.

There are so many financial possibilities that digital finance can make possible for women in Bangladesh. By considering the barriers to financial inclusion, the country is well on its way to improving the lives of its women and their families.

– Connie Loo

Photo: Flickr