Women in Ghana conduct business. Photo: IITA Image Library (flickr)

This article was republished in The Christian Science Monitor.

Ghanaian women are mothers, daughters and wives. Add entrepreneurs to the list. Female entrepreneurs are flourishing across Africa, but Ghanaian women are leading the pack.

Education, national stability, and microfinance have spurred their success.

Ghana’s government recognizes the important role women play in reaching the country’s development goals. “No nation can move on without emphasizing the education and emancipation of women,” said Vice President John Dramani Mahama.

One result of that attitude is an increase in women’s education, and the cornerstone of further education is literacy. The literacy rate among females between the ages of 15 to 24 is 78 percent, according to UNICEF, up from 16.6 percent in 1970. This is an impressive jump in the time span of one generation and demonstrates how many more Ghanaian women today can access the kind of skills needed for running a business, like accounting, marketing and management.

Ghana’s stability has also helped catapult its business environment forward. It was the first nation in sub-Saharan Africa to achieve independence in 1957. In the 1970s and 1980s, political instability took its toll on the country. But since then, Ghana has regained political stability and goodwill from the international community, providing an environment ripe for business growth and development. As a result, investor confidence has increased. Rising investment has influenced Ghana’s economic prosperity, and the country is currently the fastest-growing economy of 2011, growing 20.2 percent in the first half of the year, according to Economy Watch.

Ghana's natural resources also boost its per-capita GDP, which International Entrepreneurship reported is twice that of its poorer West Africa neighbors.

Finally, for decades Ghana has been reaping the benefits of microfinance, a tool that may be especially effective in empowering women. As described by the Economics Web Institute, Ghana provided subsidized credit in the 1950s, established an Agricultural Development Bank in 1965 for fish and farm loans, and required commercial banks to set aside 20 percent of their portfolios for agriculture and small-scale industries in the 1970s and early 1980s.

The result? Today, the female labor force participation rate in Ghana is estimated at 50.1 percent—and women account for about 50.2 percent of the entire population of Ghana. With improved education, the prosperity of the country, and a stable microfinance sector, the women of Ghana are making an impact in the entrepreneurial world that cannot be denied.

Muhammad Yunus, Bangladeshi Economist and founder of the Grameen Bank. Yunus is credited with popularizing the mircrofinance model. Photo: World Economic Forum(Flickr)

The 2011 Global Microcredit Summit convened last week in Spain amid growing concerns that microfinance might not work as advertised.

The Microcredit Summit Campaign promotes microlending to the world’s poorest familes—and especially to poor women--as a means of poverty alleviation. However, there is a growing global debate over whether microfinance actually lifts people out of poverty, as organizations such as The Microcredit Summit Campaign claim.

Critics point to India’s microcredit crisis and call it a myth that everyone desires to be an entrepreneur. As James Surowiecki argued in the New Yorker, “in any successful economy most people aren’t entrepreneurs--they make a living by working for someone else.” For many, a bank loan will be the best route out of poverty, particularly in the agricultural sector where that loan can help families increase their crop yield or add a new cow to the herd. But others are simply looking for a regular paycheck, like the millions of families making their way in urban area. Furthermore, as Interpress News Service reports, many borrowers feel that they have been taken advantage of by microfinance lenders that charge high interest rates for the small loans, without an additional suite of poverty-alleviation services (like providing business training and financial literacy workshops) to make the interest rate worth it.

Globally, microcredit still remains the most widespread tool in poverty alleviation programs, but more people are beginning to point to its weaknesses and suggest reforms. Others suggest a wider variety of programs aimed at increasing poor people’s incomes and job opportunities.

Microgrants serve the same populations as microfinance lenders, but fund projects that engage whole communities rather than individuals who are unlikely to generate jobs and alleviate pressing social problems. The microgrant accomplishes something different than microloans—social sector projects that benefit whole communities rather than single entrepreneurs or individual businesses, as Marcia DeSanctis reported in the Huffington Post. And microgrant projects are proposed and developed by local people who are intimately familiar with the conditions in the communities they live in—not by foreign "experts."

The global microfinance community is going through a transition as more and more researchers conclude that microcredit is not a ‘magic wand’ against poverty.

Almost all microfinance borrowers are women who utilize funds obtained to start and maintain small businesses, such as broom making. Photo: Michael Foley Photography (flickr)

Of the three main microcredit models; non-profit, commercial, and regulated full financial services, which is best equipped to help the poor?

The Clinton Global Initiative invited three heavyweights from the microfinance industry to debate this very question: Nobel prize winner and Grammeen Bank founder Muhammad Yunus, SKS Microfinance founder Vikram Akula, and Mary Ellen Iskenderian, the president and CEO of Women’s World Banking. You can listen to Planet Money's distilled version of the conversation below.

Yunus presented an argument against the profit-maximizing, commercial approach, contending that rich investors seeking profits should not be allowed to usurp capital from the interest payments of the poor. He argued:

Grameen Bank is a for-profit organization…We are not NGO, we are a bank. But ownership is the question. Grameen Bank is owned by the borrowers. So we make profit, profit goes back to them. So we protect that part. So what we are opposed to when you say profit or commercialization, it’s money of the poor going out to somebody else.

In contrast, Akula alleged that the only way to extend microcredit opportunities to as many poor people as possible is to follow a commercial model:

Women from more remote areas would often come and say ‘Can you start in our village?’ and we’d always have to say ‘No, you know, it’s grant run and so we don’t have funds,” and we’d have to turn them away and they’d walk away disappointed… I left my NGO and came up with the idea of using a highly commercial model so that you could access capital markets and go back to that [poor] woman or any poor woman anywhere in the world and say ‘Yes, you too can have an opportunity.’

The other panelist, Iskenderian, advocated extending full financial services to the world’s poor. She reasons that the poor need access to regulated, commercial institutions that provide credit but also accept deposits and protect assets. However, she acknowledges the difficulties of becoming a “microbank,” specifically that laws often prevent the formation of such institutions and that it is extremely expensive to run them.

In The Wealth of Nations, Adam Smith first articulated the notion that firms acting in self-interest and profit-maximization would unintentionally produce socially beneficial outcomes. But is it the best way to prioritize the needs of the poor? You decide.

October's comment of the month comes from James in Portland, Oregon. James commented on our story Poverty Isn't Always Ugly. He reminds us that poverty rears its ugly head in many forms — not just monetarily. For his efforts, we will make a $25 donation to a project of his choice on Global Giving.

There are definitely a few issues to consider and discuss relating poverty. In reading Muhammad Yunus' book "Creating a World Without Poverty". He felt, and I agree, that the definition of poverty isn't going to be the same from country to country. For Bangladesh the Grameen Bank developed there own definition of poverty for their internal purposes and to measure impact over time.

Many organization attempt to place a dollar amount of income/day to determine poverty, we've heard the $2.00 per day used frequently. Income isn't a solid method because it doesn't factor variables outside of money. Location and access to natural resources for instance are variables that change the need for money, or an individuals dependence upon it.

Bottom line, I think it's important to realize that poverty can't be defined the same way in every community we visit. Poverty includes physical need and extends into the mindset of individuals and how they view the world around them. It's also important to be culturally sensitive when working with people around the world. Sure, we have it pretty good here in the U.S. but we have problems too. We shouldn't seek to cookie cut our cultural values everywhere we go.

Keep writing in and share your though-provoking comments for a chance to win $25 towards the well-deserving charity of your choice!

* Lest anyone think $25 is not a lot, consider these figures from our affiliate Mercy Corps: $25 delivers clean, safe drinking water to 50 people in one of eastern Congo's sprawling displacement camps. $25 provides seeds to farmers in cyclone-devastated areas of Myanmar to plant five acres of rice. $25 gives traumatized children in Darfur 12 weeks of activities and psychological care to help them heal.

Dr. Muhammad Yunus. Photo: U2005.com (flickr)

Can a lotus bloom out of this recent economic mud? Dr. Muhammad Yunus seems to think so. In a recent interview with CriEnglish, the Nobel Peace Prize Winner says that the world should see the economic crisis as an incredible opportunity.

We shouldn't just look at it [the economic crisis] as a crisis only. It is the greatest of our opportunity to rebuild the economy, rebuild our concept, rebuild our way of doing things so that we move to the right direction with the right structure, because this [current] structure will create problems of the type that it already created...We just kind of put it — patched it — together to move again. Patchwork shouldn't be done this time. This is the real world we're overhauling. Take it apart. Take piece by piece and rebuild, redesign so that we can go on. I think that is the most important part.

Microfinance has worked in the developing world, but will it work here? Photo: PetroleumJelliffe (flickr)

A few weeks ago microfinance pioneer Professor Muhammad Yunus was in Queens, New York. No, he wasn’t soliciting funding or international support for his Bangladesh-based microlending institution. He was cutting the ribbon on the brand new Grameen Bank America building.

Thousands of miles away from the original Grameen Bank, the American version will function much like its Bangladeshi counterpart: loaning to groups of women rather than individuals. Like the women who first participated in Yunus’ innovative banking scheme, American borrowers will convene at one member’s house to collect weekly dues. This type of group-lending model increases accountability, since defaulting on your loan affects your peers' access to credit as well as your own.

The Grameen Bank targets women because they're more reliable borrowers. To date, Grameen America has loaned upwards of $250,000 dollars to more than 100 women who are using their $500 to $3,000 loans to establish or expand businesses ranging from floral arranging to house cleaning.

But Yunus has some skeptics to win over. Many question whether the Grameen model will resonate with Americans. Microfinance expert Saiful Islam says "Bangladeshis, Indians, Latinos will follow it, but I don’t know about others." In 1985, a similar program started by Yunus in rural Arkansas at the request of then-Governor Bill Clinton failed due to mistrust among participants, according to Shorebank's Mary Houghton, who helped advise the microfinance experiment in Arkansas.

It does seem somewhat of a strange fit: banking targeted to empower the poorest of the poor in one of the most prosperous countries in the world?

The United States does have its fair share of people living in poverty, however. Immigrants in particular have a hard time accessing credit and are more likely to use predatory lending agencies that charge steep interest rates. What's more, the Center for Financial Services and Innovation, reports that approximately 40 million American households are considered underbanked.

Also, contrary to public perception, microcredit is not aimed at the poorest of the poor. "It’s actually supposed to help those below a certain poverty line who are looking for self-employment as a route out of poverty," says Raj Desai of the Brookings Institution.

In that case, the U.S.-based bank may run into trouble. Approximately 1 out of every 11 Americans work for themselves, while about 1 in 4 in Bangladesh are self-employed.

Yunus will need time to prove that the American model can be successful. It may be that American women need more than greater financial access to climb out of poverty. But Yunus' large following and wide array of awards — including a Nobel Peace Prize — suggest he has a fighting chance.