Help women access loans

The poverty of women in this region is both a consequence of and a factor of their lack of access to productive resources, including credit.

According to information collected by the Women in Development Southern Africa Awareness (WIDSAA) programme, there are no laws in any Southern African Development Community (Sadc) country that prohibit women from acquiring loans from banks or other financial institutions in their own name and right, but there exist practices that make it difficult for women to access credit.

Many countries also lack easily controllable practical mechanisms to detect, control, and prevent discriminatory action between the sexes that may occur in a society.

Banks are especially not friendly towards poor people as they are geared more towards profit maximisation and less towards social development goals. Women are considered “credit risks” because of the nature of their businesses, often small-scale or cross-border trading.

In South Africa for example, women entrepreneurs are described as “un-banked” because banks are not geared to lend “low” amounts of money, which most women need to start businesses.

In a paper on “Financial Market Liberalisation and the Marginalisation of Women”, Sara Hlupekile Longwe notes that the recovery rates on loans given to women by credit associations in Zambia are as high as 95 percent, yet banks continue to consider women credit risks.

Some banks are turning increasingly towards micro-finance in order to provide small loans to people, and women stand to benefit from this. However, the same constraints that have affected women still hinder their access to credit from these sources.

A visit to one of the banks offering micro-finance in Zimbabwe recently revealed that, for a loan equivalent of US$297, a person needs to provide collateral in the form of household assets.

Other constraints that limit women’s access to the loans includes high interest rates of at least 50 percent, and the need to provide a bank statement. This condition is problematic for the majority of women who do not have bank accounts and are not in formal employment.

Most banks have high service charges, low rates of interest for depositors (against borrowing rates), and very high minimum deposits required for operating an account, thus discouraging poor people from opening bank accounts and accessing loans.

The regional average for minimum deposits in accounts is between US$75 and US$100. In Zambia, for example, the minimum deposit for a savings account is the equivalent of US$100, in Zimbabwe it is on average US$99, and in South Africa it is US$75.

At one international bank in Botswana, getting a loan is dependent on a person having a steady monthly income, which in turn requires a person to be formally employed.

In order to borrow the least amount of money, about US$2 488 (Pula 15 000) a person needs to have a monthly income of US$415. To be eligible to borrow US$6 799, a person needs to earn US$746 each month and to borrow US$15 091; a person needs to earn US$1 244 per month.

This situation means that the average Motswana is barely eligible to borrow the minimum amount of US$2 488 because, according to the Botswana Central Statistics Office, the average citizen was earning US$418 per month in 2005.

Micro-finance institutions have offered a lifeline for most small-scale businesses in countries such as Malawi, the United Republic of Tanzania and Zimbabwe. These institutions however face sustainability problems, as most of them remain donor-funded.

Many women in southern Africa, therefore, have had to rely on government rather than the financial sector to provide small loans to start up or re-capitalise their businesses. In Zimbabwe, the Ministry of Small and Medium Enterprises established the Small Enterprises Development Corporation (Sedco) to provide loans to small and medium enterprises.

In 2005, more women than men accessed the loan booth facility under Sedco, which provides small loans to businesses that do not require collateral.

Sixty percent women compared to 40 percent men accessed the small loans, while 83 percent men compared to 17 percent women accessed the long-term loans.

Given this state of affairs, economic policies by governments must ensure women’s access to alternative source of credit where they can receive small loans that are pro-poor and pro-women. Pro-women credit institutions should have more branches in rural areas to provide banking services to small-scale farmers and small rural businesses, in addition to allowing for minimum deposits and small loan facilities. Such facilities would go a long way in ensuring that women access credit and improve women’s economic status. ‘ sardc.

September 2006
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