The following is an excerpt from the Report of the UN Expert Group on Women and Finance, chaired by WWB.

Backing Women as Economic Actors

A major means to improve the status of women is to open poor women's access to finance.

Around the world, women's economic positions are adversely affected by their lack of access to productive resources. A woman's economic position directly affects:

• Her ability to purchase needed improvements in health, housing and education.
• Her bargaining position and power in the family and community.
• Her ability to act against violence in her home and in her world.

Most poor people are women and most women are poor. Almost all low income women are economically active. Most are microentrepreneurs and self-employed in the informal sector. The major economic roles of low income women entrepreneurs and producers are often undervalued and ignored.

Access to finance is central if women are to leverage their time and talents to transform themselves, their families, their enterprises, their economies and their world.

Low income women entrepreneurs and producers—the majority of the world's women—need and merit expanded access to finance, information and markets. Access to finance and economic participation is key to building a woman's confidence and capacity to use her voice to reshape her life. Credit access enhances women's status in the community and enables a woman to build income and assets that are clearly hers. Access to finance is central if women are to leverage their time and talents to transform themselves, their families, their enterprises, their economies and their world. Compelling arguments exist for making particular efforts to open low income women entrepreneurs' access to finance, information and markets:

• Women are major actors in the global economy. Women's roles as the farmers, traders, and informal sector industrialists are major, and often overlooked.
• Global experience with microlending demonstrates that women are better credit risks than men, and that poor entrepreneurs have higher repayment rates than large bank clients.
• Investing in low income women entrepreneurs is a highly efficient means to achieve economic and social objectives. Women manage household finances in most of the developing world. As more cash and assets get into the hands of women, most of these earnings get into the mouths, medicine and schoolbooks of their children.
• Increasingly, many households are headed by women, de facto or de jure, relying on the woman's earnings as the main or sole source of income for the family.
• Women tend to be honest, practical and reliable. This results in a low percentage of business failures and loan defaults among women business owners.
• Most women place a high utility on security. This means major potential for large savings mobilization, if the mechanisms are women-friendly.

Responding to Where Women Are

If financial systems are to reach low income women entrepreneurs and producers, the delivery systems need to respond to the common characteristics of low income women and their businesses:

• Women do most of the work but have a small share of the physical and financial assets. As a result, most women do not have traditional collateral.
• Most women in developing countries are poor, meaning that their difficulties in achieving access and expanding economic participation are related both to gender and poverty.
• Low income women have heavy productive and reproductive roles, which keeps many in very small businesses.
• Low income women normally are busier and less mobile than men. It is important that lending and savings services are available where the women are.
• Many women in developing countries are illiterate. While illiteracy usually does not hinder the success of a woman's microbusiness, illiteracy does create barriers in meeting normal bank loan requirements. Poor women entrepreneurs often do not fit traditional lenders' images of "bankable" clients.
• Low income women tend to concentrate on different economic activities than poor men: different industry and service subsectors, different niches in the value adding chain, and different price-quality segments. If the needs of low income women are to be addressed, these subsector differences need to be taken into account in designing general and subsector-specific policies and programs.
• Women are often less exposed to different environments and innovations, since they have fewer opportunities to move from their locale. Exposure is important.
• Poor women entrepreneurs operating in isolation often lack the confidence to change their fate. Organizing and relationships are key.
• Women, particularly low income women, face many cultural barriers that need to be taken into account in designing policies, programs and specific services: norms on appropriate sectors for women, family expectations on a woman's role, denigration of women's economic activities, and undermining of women's confidence. For many reasons, confidence building activities are more important for women than for men.
• Women face particular constraints on property rights, and in some countries, legal barriers still exist for women as subjects of credit. These barriers need to be removed.
• Poor producers, entrepreneurs, and self-employed women need different mechanisms and procedures than those of the formal banking sector. Key characteristics of poor self-employed women include: concentration in goods and services rooted in a traditional skill base, low capacity for bearing financial risk, family-based operations, capacity for hard work, spirit of endurance and enthusiasm, and openness to learn and improve their economic conditions.

Normally, financial services that meet the needs of women, but that are open to men, will give women adequate access. Women tend to take advantage of sound financial services geared to microentrepreneurs and producers. In some settings, however, specific targeting and women-only approaches are necessary.

Low income self-employed women tend to operate in less sophisticated, low end subsectors that are plagued by: technology obsolescence, market saturation, and vulnerability to competition from mass produced goods, made locally or imported.

Backing Women Microentrepreneurs and Producers

For low income women in developing countries, the focus should be on backing microenterprises.

• If the objective is to reach poor women and to alleviate their poverty, it is important to target microentrepreneurial firms with fewer than five workers. This is where the vast majority of poor women are, and where the major problems with access exist.
• The vast majority of women start out with very small businesses. Today's microenterprises are tomorrow's small firms, if they are positioned to grow.
• Microenterprises help reduce rural and urban unemployment, and provide goods and services to the poor at reasonable prices.
• We now know how to build sustainable financial services for microenterprises. Successful systems can be expanded, and adapted for use elsewhere.

Making the Transition from Micro to Small Enterprise

It is also important that services are available to help women make the transition from micro to small business.

• One of the toughest issues facing poor women entrepreneurs is the need to diversify out of petty commerce and dead end product groups. Low income self-employed women tend to operate in less sophisticated, low end subsectors that are plagued by: technology obsolescence, market saturation, and vulnerability to competition from mass produced goods, made locally or imported.
• Women repay their loans because they can, and because they must if they are going to maintain this new access to finance. The superior repayment performance by poor women exists in spite of the concentration of women in relatively vulnerable and low-growth sectors.
• The expansion of microenterprises to small firms should be encouraged. Employment does not have to be self-employment if poverty alleviation is the goal.
• Small and medium sized enterprises can be, and are, competitive globally. In developing countries, small firms need access to know-how and market links to increase their competitiveness.

Microenterprises owned by women with the interest and capacity to grow have different sets of service needs.

• Survival oriented, self-employed producers, which may constitute 60% to 75% of microbusinesses at a given point in time, need credit and savings services as the crucial and sufficient points of departure.
• For the 25% to 40% of microentrepreneurs with the capacity and interest to grow, non-financial business and technical services, in addition to credit, become increasingly important.
• If microenterprises are to grow, entrepreneurs need to be able to deal with an increasing degree of complexity in their businesses: more specialization in management functions; innovation in technology; a wider range of more complex, differentiated products; and more complex market patterns and marketing channels.
• Poor self-employed women can expand their enterprises when they: form economic organizations; save, when appropriate savings mobilization mechanisms are available; establish effective forward and backward linkages for accessing raw materials and markets; obtain adequate credit access; and expand their entrepreneurial and management capacities.
• Experience indicates that growth oriented micro and small enterprises need:
  
  
  1. Fast, timely access for working capital and fixed investments as clients develop a borrowing track record.
  2. Complementary guarantees to those offered by the enterprise to facilitate access to institutional credit.
  3. Effective technical services on management productivity and quality to raise the firm's competitiveness level.
  4. promotion of commercial linkages among firms allow economies of scale in production, purchasing and marketing.
  
  
  
• It is important not to pigeon-hole microentrepreneurs as survival vs. growth businesses. People can change their objectives as their experience and confidence grow, and as external circumstances change.
• The key objective is to put at the disposal of small and microenterprises the different elements needed to grow and modernize, so that they can use these services according to their entrepreneurial attitude. Services should be flexible enough to evolve with the firms' dynamic shape as they move from survival to growth patterns.
• It is important that non-credit business services are available on a voluntary basis. Clients should pay for these services, ideally on a fully costed basis. Experience demonstrates that it is more difficult to achieve operating self-sufficiency on training and commercial linkage services than on financial services. A case can be made for declining but continued subsidies over time for effective technical and marketing services.

Reprinted with permission from Women's World Banking.

To read another Global Envision article about microfinance, see
Microlending Explained.






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