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Loans for the poor – more than just finance

Despite being much better at repaying debts, women in Zambia find it far more difficult than men to access loans for starting up small businesses.

Thirty-year-old Mary Mbao Kaiba has been running a second-hand clothes shop for many years in Lusaka. But the money she makes is not enough to feed and educate her children – two of her own and four orphans.

“It has not been easy. At times we sleep hungry, at other times we receive support from relatives,” says Kaiba.

For many people in Zambia, a severe shortage of salaried jobs means self-employment is the only way out but small businesses are also vulnerable to changes in the economy.

In 2003 for instance, when the Zambian economy took a turn for the worse, Kaiba found it hard to cope with an influx of cheaper textiles from China. In desperate need of some cash to keep her shop from closing, Kaiba approached several banks for a loan. But, like many others in self-employment she was turned down because she had no land or other assets to show as collateral.

Determined not to give up, Kaiba consulted other women running small businesses and found six others in a similar situation. Some needed loans to buy vegetable seeds, others to develop their businesses, and others needed start-up capital to set up market stalls.

The women joined forces and approached the Promotion of Rural Initiatives and Development Enterprise (PRIDE) to apply for a single large loan that could be divided among them. They believed that sharing the responsibility of repayments would make it a more manageable option.

PRIDE agreed to lend the money, but at a hefty interest rate of around 35 per cent and on condition the loan was to be repaid within four weeks.

As with many other organisations that lend small amounts of cash to the poor across Africa – so-called ‘microfinance’ – PRIDE has found that women are better than men at repaying loans.

But a 2002 report by the United Nations Development Fund for Women (UNIFEM), Empowering Women through Microfinance, says that although in theory women now have easier access to loans than they did before, in practice their ability to benefit from these loans is often limited because of widespread discrimination against women.

“Some microfinance initiatives are providing a decreasing percentage of loans to women, even as these institutions grow. Others have found that on average women’s loan sizes are smaller than those of men. Some differences in loan sizes may be a result of women’s greater poverty or the limited capacity of women’s businesses to absorb capital,” it says.

In Zambia microfinance services are almost always provided by private banks and money-lending businesses, many of whom have sprung up specifically to meet the demands of people on low incomes.

Gender activists say the government’s poverty reduction plans must also include policies to ensure that those who lend money do not discriminate against women.

Gregory Chikwana, an economist working for the Civil Society for Poverty Reduction says the Zambian government has tried to build gender equality into all aspects of its poverty reduction plans but that the results have been mixed.

“It is true that women have had limited access to finance and banking institutions. Women have no asset base. Attitudes of bankers and microfinance institutions need to change and bankers need to stop thinking twice before giving loans to women.”

One problem is that women rely heavily on working in the informal sector.

A report compiled by the Southern African Research and Documentation Centre shows that local governments, state-owned corporations and private companies hire far more men than women. As a result many women run their own market businesses, selling vegetables and other perishable commodities, usually on a tight budget and making little money.

According to the report, many small businesses are set up by widows or wives of jobless men who have lost employment through retrenchment, dismissal or retirement.

Zohra Khan, a policy advisor at One World Action says that microfinance could end up shifting responsibility for savings and income to women – with men having more 'freed up' income to spend as they wish.

“The important thing is that there must be an enabling environment for women to progress economically, socially and politically. This often involves a raft of measures such as gender-sensitive macroeconomic policy, sensitive policy and legislation on women's rights and access to services.”

“Women have been greatly affected by privatisation of many parts of the economy – and the evidence of this is seen in the large numbers of women selling on the streets to make ends meet,” says Lydia Madyabi, Assistant General Secretary for the National Union of Public Service Workers.

Madyabi thinks women are the most affected by the new conditions and tough requirements demanded of employees by private companies.

“Three quarters of women lack confidence and are always steered by someone. As a result they end up with only the most basic education. Employers now want even cleaners to have ‘O’ level [high school] qualifications. So the Zambian woman ends up selling on the streets because she cannot get a job.”

Kaiba and her group of friends have learnt to join hands in order to survive hard times. But they are the lucky ones. There are thousands of other women who slip through the net and end up without a business to run, without an income, and living hand-to-mouth.

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