Microcredit loans: A tool for women’s empowerment

In today’s time and age, it is refreshing to find women represented in almost all professions, vocations, and businesses. And they are not only represented in numbers but also in relevance, even in business. Currently, women constitute about 40% of the 41 million Small and Medium Enterprises (SMEs) in Nigeria.

Men still hold the lion-share in the business space, but women are no longer intimidated by patriarchal dominance. Rather, they are rising to the challenge, breaking glass ceilings in the business world and gradually making their mark.

A worthy mention is Folorunsho Alakija, a woman who started as a secretary in the corporate world before deciding to delve into business. Today, she is the CEO of Supreme Stitches, a tailoring company and Famfa Oil Limited, a petroleum company. Folorunsho has a net worth of $2.1 billion and was named the richest woman of black or African ancestry in 2014, surpassing Oprah Winfrey.

A slew of millennials like Olamide Orekunrin of Flying Doctors, Isioke Ogieowonyiin of L’espace, Eseoghene Odiete of Hesey designs and a host of others are redefining the business space with their entrepreneurial solutions.

However, one of the impediments to the advancement of women in business is the lack of funds to start up a business or expand a current business. Impoverished women are usually the most affected because they cannot afford the many options available to wealthy women (personal savings, family support, investment from a wealthy spouse).

This is where microcredit loans come in.

Microcredit, according to Investopedia, is a common form of microfinance that involves an extremely small loan given to an individual to help them become self-employed or grow a small business.

Commercial banks have a standing culture of giving loans to business tycoons and wealthy entrepreneurs because they have collateral and sureties. Banks don’t extend loans to those with little or no assets and generally don’t engage in small scale loans. Microcredit bridges this gap by providing small scale loans to poor entrepreneurs to help them get their businesses off the ground. Women stand to benefit ostensibly because they make up a greater percentage of small business owners.

Bank loans are usually associated with exorbitant interest rates that a struggling entrepreneur cannot afford. A poor woman trying to start a business or grow a business while taking care of the needs of her family will not find it funny repaying a loan with 20% interest rates; it will cripple her finances. However, microcredit loans come with low-interest rates and fair repayment plans that will allow the entrepreneur to manage the financial strain that accompanies loans.

Women are natural caregivers. If a woman is empowered financially, she will extend the profits of her business to her family to ensure that their needs are met. Even studies prove that households with working moms are more likely to give their children a good education, medical care and other good things of life as much as they can afford than families where the woman is a housewife with no economic value.

A 2015 study by McKinsey Global Institute reveals that increasing the participation of women in the economy of a country can increase that country’s potential gross domestic product (GDP) and per capita income. To put it simply, it means that women hold the key to global economic development, prosperity and stability. And what better way to explore that key than empowering them through microcredit loans to open or expand their business.

There is a correlation between the hand and the mouth, and an empowered hand equals an empowered mouth. As women become more economically involved, they also become more socially and politically involved. This means they can advocate for changes in their communities to improve their well-being, vie for and occupy public offices. Women who are not economically empowered will always ‘hide their face.’

What makes microcredit loans an exceptional solution for poor businesswomen is access to loans and the non-financial services they offer these women like business training, information access, technology development, marketing support, financial consultations, monitoring, and evaluation.

Access to these services enables women entrepreneurs to deal with difficult situations that arise in running their businesses, engage in income-generating activities, improve the performance of their projects, and ensure the success and sustainability of their businesses. On the other hand, the lack of these services is one of the primary reasons for the failure of female entrepreneurs’ projects and their transformation from entrepreneurs to financially distressed women, if not insolvent.

Microcredit loans are a great tool for alleviating women’s poverty and empowering women to be economically relevant. However, if loans are handed over to women in business without a framework to ensure sustainability, it will amount to little or no progress.

It is an illusion to believe that women borrowers are treated equally to their male counterparts. On the contrary, women are marginalised because they have lower capital absorptive capacity than men. As a result, women are passed over in microcredit programmes or can only access lower loan packages, programmes, and services; this limits the range of their economic activities and returns.

A solution would be to have gender-based microcredit programmes that cater to the peculiar needs of women in business and ensure gender inclusion in microcredit loan programmes and facilities.

Women have built support groups and associations where members can access help, advice, mentorship and support. A very popular mention is the August Meeting of Igbo Women in Nigeria, where Igbo women in diaspora converge in their villages once a year to discuss matters and help themselves. Government, NGOs and microcredit facilities can partner with these women groups to disburse loans to economically deficient members. This system will allow for proper accountability of the loans and an excellent check mechanism that enlists the family and friends of the loaner to help offset the loans in due time to avoid embarrassment.

Some barriers to women accessing more loans are usually inflexible repayment rates and duration. The government should create policies that ensure that microcredit facilities or programmes adhere to a flat interest rate and repayment plan. More impoverished women can take loans to start or expand their businesses and not be too overwhelmed by the added financial responsibility.

Many microcredit facilities and programmes only pay attention to earning profits instead of poverty alleviation; this is wrong as it defeats the very purpose of microcredit loans. Therefore, the government should implement a microcredit framework that fosters impact over profit. That means loans will not be limited to those who can pay back, but even the poorest of the poor can access loans and pay back in due time.

One of the key differences between a bank and a microcredit loan is the non-financial services microcredit programmes offer to their borrowers to ensure the loans are properly utilised. Beyond the loans, these mostly illiterate women should be taught managerial skills, bookkeeping, marketing, product research and selection, market survey, branding, networking etc. This is, in fact, the most important aspect of microcredit loans that should not be taken for granted; else, the loans will amount to little or nothing.

Revolving Business Loan for Women is an advocacy project to increase the accessibility and affordability of loans for impoverished women to do business. This project advocates for more microcredit solutions to cater to women in business and improve their economic productivity.

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