Philip Issa | KF17 | Palestine
In my last post, I examined the extent to which the lending programs of Kiva’s Palestinian partners FATEN and Ryada can be said to empower women. One characteristic that both programs share is that they only make individual loans. But microfinance doesn’t have to be done at the individual level, and there can be significant advantages to adopting a group lending approach to empower marginalized social groups. With this in mind, I’m excited to introduce you to the Deir Bzei Women’s Cooperative. They’ve leveraged microfinance to finance initiatives that support their members and benefit the women and children of their community.
Deir Bzei Women’s Cooperative
I visited the Women’s Cooperative at their meeting house in Deir Bzei. It’s a large house with a spectacular view of the valley below. The main entrance opens up to the valley, and, sitting in the parlor with 10 women and only one other man (the loan officer), I have to admit that I felt a world away from the patriarchal order outside.
In microfinance terms, the cooperative functions as a Village Bank for microlending. An outside microfinance institution lends money to the cooperative, and the cooperative in turn lends to its 30 members. In this manner, the cooperative’s members manage all lending decisions and set the terms for repayment.
The Women’s Cooperative is partnered with the Arab Center for Agricultural Development (ACAD, a non-Kiva MFI) to finance its lending program. ACAD takes precautions normal to the village banking model to ensure that its funds are repaid, but these precautions tend to benefit the cooperative and its members, as well.
Fundamental to the Village Banking model is that members create compulsory savings accounts at the cooperative. This establishes a pool of collateral in case a member defaults, and in effect, the group is self-insuring from the perspective of ACAD. It’s a powerful security that allows ACAD to lend at 4-5% interest annually, lower than typical rates for individual microloans. But it also serves as an important step on the way to allowing the cooperative to become a self-sufficient members-only lending institution (akin to a credit union), and it mandates savings, a benefit that I will discuss later.
ACAD trains the cooperative members in best microfinance practices so that they can manage the lending program independently. After the initial training period and the establishment of by-laws for the lending program, a loan officer will meet with the management of the cooperative every three months to collect data on new loans and repayments and to provide technical assistance. Through training and continued partnership with ACAD, members of the cooperative gain hands-on experience with financial management and accounting. This is especially valuable for women in rural areas, who face many barriers to entering the traditionally male-dominated financial profession.
The Women’s Cooperative has disbursed loans to its members that are typical of microfinance: loans for farming, husbandry, sewing, and other such entrepreneurial purposes. But this cooperative also makes loans that the other two village banking cooperatives that I visited do not: loans for education, home improvement, and medical expenses. These loans are distinctly family oriented, and I could tell that the male loan officer would have preferred that more loans went towards “productive” projects. But from the standpoint of women’s empowerment, this is exactly what we would aim to see happen – the recognition that non-entrepreneurial projects are also deserving of credit.
One cooperative member took out a loan to purchase beekeeper equipment after divorcing her husband. Divorce has potentially negative ramifications for a woman’s ability to access credit. Individual microloans often require a guarantor’s government salary as security. Since social capital in Palestine is developed largely through the husband (and, in the case of women, since being married is an important status symbol in itself), women tend to lose many of the relationships they may need to secure a loan or enter the working world after a divorce. But this was not the case of the beekeeper member of the Women’s Cooperative, who was able to secure her loan by virtue of her savings account and the trust of her fellow members. Plus, she got a loan for beekeeping equipment – how cool is that!
Besides financing the individual loans made by the cooperative, ACAD also makes one large loan a year for a cooperative-owned project. For the past two years, ACAD has financed ⅓ of the costs for the Women’s Cooperative to open a supermarket in the village, with the remaining investment coming from members’ savings accounts. The cooperative owns and manages the market, providing members with valuable management experience as well as income to replenish their savings accounts and invest in other initiatives.
The Deir Bzei Women’s Cooperative supports its members and its community in other ways, as well. Some of their initiatives include a cafeteria program, which employs members to cook healthy lunches for a local school and nearby orphanage, and a weekly class for adolescent girls. The class covers social and gender-specific topics, business and financial principles, and healthy child-rearing practices.
Advantages of the Village Banking Model
Linda Mayoux writes in an analysis of microfinance that while it has the potential to empower women, it equally has the potential to marginalize them and reinforce existing gender roles unless careful design approaches are taken. Women may be excluded by their male relatives from management of the loan, from income generated by the loan, or from ownership of the assets purchased with the loan. Women who do secure the earnings from their loan activity may find that they then have to cover lost male earnings, as the men devote less of their income to household expenditures. Women who work and demand more say in the household may face severe pushback from their husbands. Women may continue to be excluded from certain work sectors or forced to abide by norms that limit ability to lead a business, manage employees, and interact with customers.
The best strategy for empowering women through microfinance, Mayoux writes, is to make it a primary objective and not subsidiary to poverty alleviation or operational sustainability. This means incorporating women’s voices and the objective of empowerment in all parts of the lending relationship between institution and borrower. Should loan oversight be strict to keep the money in the hands of the borrower instead of her husband? Or should it be lax, to allow a borrower to support her family in a time of emergency? Should loan sizes be small to avoid attracting the attention of the husband? What interest schedule works best for the borrower? Should there be an emphasis on savings, or do existing informal networks suffice? What complementary services, if any, should be provided? Might mandatory group meetings unnecessarily eat into the time of women borrowers to tend to household duties? How should ownership of assets purchased with a loan be secured in the woman’s name? What loans best serve to improve the lives of all members of the household and allow women to assume leadership roles at home and in new sectors of business? And so forth.
The beauty of the village banking model is that it leaves many of these lending decisions in the hands of the borrowers. ACAD itself does not emphasize women empowerment – as its expanded name suggests, its focus is agriculture – but by entrusting many of its traditional responsibilities as a lender to the Women’s Cooperative, the objective of empowerment is strongly incorporated into the structure of the lending program. Furthermore, the compulsory savings program secures lending resources and all associated income from it in hands of the women. Once money enters a savings account at the cooperative, the ACAD loan officer explained to me, no one but members of the cooperative has a right to access it.
Whether through lending to members who otherwise may not be able to access loans, supporting the educational and medical expenses of members’ families, providing hands-on experience in accounting and business management, financing members to enter male-dominated sectors, providing a safe meeting space for members to meet, cooking healthy meals for local schools, or teaching a weekly class for teenage girls, the Deir Bzei Women’s Cooperative has certainly taken full advantage of its resources to empower its members and support its village.
Mayoux, Linda, 2002. ‘Microfinance and women’s empowerment: Rethinking ‘best practice’’, Development Bulletin, no. 57, pp. 76-81. http://devnet.anu.edu.au/GenderPacific/pdfs/06_gen_status_mayoux.pdf