By Mithula Guganeshan –
Microfinance was introduced to provide affordable financial services to women from low-income households with an objective intended to finance income-producing activities, build assets, protect against risks and thereby fight against poverty. It is widely believed that microfinance would benefit the poor by eradicating poverty and result in financial inclusion, encourage savings, job creation, provide education, improve health & welfare and finally empower women.
However, evidence from research studies on Microfinance shows that there is a lack of robust evidence to prove the strong impact of microfinance on poverty alleviation and women empowerment (Duvendack et al, 2011). There is lack of quantitative assessment on Microfinance Institutions in Sri Lanka besides the biased results published by MFI’s. Due to ignorance or lack of sufficient understanding on the impact of microfinance, Government and policy makers fail to introduce solid measures to adequately monitor and regulate the microfinance industry.
Microfinance tends to target women borrowers as they are statistically proven to less likely to default. Nevertheless, borrowing a sum of Rs. 25, 000 would lead to Rs. 1,000 weekly repayments for 10 months resulting in an interest rate of 72% per annum. Such high interest rates loans were borrowed and used for consumption rather than any income generating activity. Unlike the rich or the middle class, women from poor backgrounds primarily borrow to meet their basic needs for survival especially food and shelter due to the lack of employment opportunities and marketable skills.
Women are subjected to domestic violence as micro loans are easily accessible and exclusively available only for the women. So, the men from low-income families are exploiting the opportunity offered and pressurize the women to obtain credit to finance household consumption along with their own personal consumption needs such as alcohol, tobacco etc. As a result female borrowers were unable to hold full control on credit. Opening channels to provide easy access to credit has resulted in tensions within the household leading to abuse and violence against women.
Men rarely take any responsibility or are held accountable to repay the installment once the money is used for household/personal consumption needs. Women are often subjected to humiliation and harassment by the credit officers as they are unable to settle their debts on time.
Therefore, women are increasingly facing gender oppression by institutions (representatives of the institution) within the public sphere as well. Generally, when it comes to violence against women greater emphasis has been given to violence against women inflicted within the domestic space by individuals involving personal relationships. Public humiliations by representatives from institutions are often under-reported where institutions are rarely held accountable for causing psychological and economical abuse on women. They are being subjected to insults and embarrassments as the credit officers are trained to collect the interests/repayments through any means.
Recent news on a suicide of a woman and her 2 year old baby from Northern Province displays the severity of the credit issue. The woman committed suicide following the visit of a loan officer requesting for the monthly payment of Rs.1, 900, which later resulted in an argument between the couple. Women in debt are subjected to violence within closed doors and harassed in public as well.
Microfinance has taken a detour from its original intention and objective, to alleviate poverty. Only a handful of microfinance institutions are charging low interest rates and working with the objective of alleviating poverty. The major flaw in microfinance is when the loans are offered without providing any training and expecting the vulnerable women to transform into successful entrepreneurs overnight. The irony is when majority of the graduates are working as employees whilst, the poor & uneducated women are expected to succeed as entrepreneurs overnight.
Measures to address the violence inflicted upon women
- Regulate Interest Rates
Interest rates charged by Microfinance institutions need to be regulated. Interest free loans would be ideal if alleviating poverty is the key reason for the microfinance institution’s existence. There is a lack of transparency in the interest rates charged and the profit-motivated firms are misusing this situation which is adversely affecting poor women’s rights.
- Training programs targeting both men & women
In a patriarchic society, a failed man’s ego will not allow the women in his household to succeed. Simply put, women’s power hurt the male ego resulting in violence within closed doors. Therefore, men from the low-income communities should be reached out and encouraged to be financially literate, save for their goals, build their own businesses or find jobs to cater to the family’s needs. More money in the hands of women in the presence of a failing man would trigger domestic violence and would never allow the family to escape poverty.
Rather than recklessly expecting women from low-income households to be entrepreneurs, microfinance loans could be provided combined with trainings on developing business skills, gender equality trainings etc.
Government and policy makers need to develop a comprehensive understanding about the microfinance industry and work towards re-designing laws & policies to explicitly prohibit & punish violence against women.
The article above has been written based on the research study conducted by the author amongst the Sri Lankan women from low-income communities holding micro-loans.