Not long after Muhammad Yunus, the Bangladeshi professor-turned-banker who has been called the father of microcredit, founded Grameen Bank, close to 97% of his small loans were going to poor women. Women have been the focus of his efforts ever since.
Why women? I wondered when I first met Yunus in 1994 while in Bangladesh on an assignment for UNICEF. From my recent conversations with Yunus and years of research for my book about his initiatives to end global poverty, Twenty-Seven Dollars and a Dream How Muhammad Yunus Changed the World and What It Cost Him, I have identified 5 reasons why Yunus concentrates his microcredit efforts on women.
1. Women make better use of small loans than men.
As Yunus grew his Grameen Bank in Bangladesh back in the 1980s and began lending to more and more poor people, he observed that women borrowers almost always spent their money in ways that help their families over time. He observed that when women received small loans, they did not squander their money on snacks or luxuries as men did. Instead, they used their funds to buy some chickens, a cow or some seeds. They put the money they made selling the resulting vegetables, eggs or milk into providing more food for their malnourished children or to sending them to school. Thus, they were able over time to improve their families’ diet and education, contributing to the cycle of poverty alleviation.
2. Women have a better track record when it comes to repayment.
At commercial banks where middle class men are the primary borrowers, repayment rates are typically less than 70 percent. Women borrowers at the Grameen Bank have repayment rates that have been 97 percent year after year. Critics have questioned Yunus’ numbers, but close examination has confirmed this high rate of repayment from poor women who have no collateral to put down. I believe the high repayment rate is explained by the social element to taking out a loan at Grameen Bank- all borrowers attend weekly meetings and gain support for their repayment from others in their small group. Also, Yunus makes special flexible plans for those in trouble-- he bends the rules a bit to carry those who are delinquent.
3. Women are a huge untapped labor pool.
Yunus believes everyone, including the very poorest of the poor, has the potential to be a successful small-business entrepreneur. This is all the more true, he discovered, for women. In rural Bangladesh, women are, even now, still overwhelmingly confined to their family compounds. But for women everywhere, the longing for independence and autonomy runs deep, and Yunus has seen first hand that many women need just minimal assistance and a bit of encouragement to become thriving entrepreneurs.
Most women in the countryside had never even touched money until Yunus’ Grameen Bank flung open its doors to the poor.In Bangladesh, he discovered that the mere act of leaving the isolation of family compounds and joining the weekly peer group discussions Grameen Bank required of its loan recipients increased women’s confidence and motivation. During these discussions women became part of a new social network, forging supportive friendships and sharing information and tips that proved key to the success of their business ventures. When he launched Grameen Danone in 2005 to make fortified yogurt, he turned to village women to sell the yogurt. Mothers eager for work and purpose went door-to-door explaining to other mothers how this yogurt could provide supplements that their children needed in order to grow.
4. Women have the right to access capital.
Yunus believes that access to credit is a basic human right. In his view, it is a matter of justice. At the time he began his lending initiatives, women were excluded from all financial services except those of unscrupulous money lenders. Borrowers at existing commercial banks in Bangladesh were 98 percent men. Most women in the countryside had never even touched money until Yunus’ Grameen Bank flung open its doors to the poor. To Yunus, this imbalance was a direct impediment to poverty alleviation--not to mention a violation of basic rights. Including women in the microcredit movement as it has spread around the world helps provide millions of people at the bottom of the economic ladder with the credit they need.
5. Women who receive loans adopt healthier lifestyles and are empowered.
When women take out a loan, the additional money available to them usually improves the economic status of their family. They also gain access to new information. In addition to attending the above-mentioned weekly peer groups that Grameen Bank requires of its loan recipients, loan recipients agree to abide by the “Sixteen Decisions.” These decisions, developed my women borrowers themselves, include such items as building and using pit latrines, keeping family size small, looking after personal health and the health of one’s children, educating children, eating more vegetables, drinking clean water and keeping the environment clean. While for many these remain goals rather than accomplishments, the striving of millions of women to implement them has contributed positively to the cycle of poverty alleviation and to women’s empowerment.