Finance: Getting Women from Micro to Mezzo

I was standing next to Shareena's little roadside food stand, where she sold homemade snacks. The place was Hambantota, Sri Lanka, a year after the 2004 tsunami. Relief had poured in, but signs of devastation were still everywhere: broken-down houses, boats beached on roads a mile from the shoreline, and tattered relief tents still being used as shelter.

Shareena had received a microcredit loan from a local women's organization, which was administering a U.S. aid-supported program to help women like Shareena pick themselves back up. With her $50 loan, Shareena was able to rebuild her business: She bought a new stove that she made snacks on to sell at the stand near her home, supporting her son and disabled husband.

This, of course, is the kind of women's microcredit success story the world loves to hear. Women get small loans, work hard, and more than 95% of the time, they repay their loans. The lender makes a buck and reinvests in more microcredit, and everyone wins. I have seen firsthand in Afghanistan, South Africa, Sri Lanka, Honduras, Burkina Faso, and many other places the power of microcredit. For women who will never be able to run larger businesses, or who will not be able to leave their homes for a job, microcredit is a lifesaver. In fact, Women Thrive Worldwide (of which I am co-founder and president), which works in Washington on behalf of the world's poorest women and girls, advocated with members of Congress to set up the post-tsunami, women-focused small-grants fund that enabled Shareena to get her loan.

But while microcredit has earned its rightful place as a player in the global economy and as a tool to reduce poverty, I've also seen firsthand its limitations. Ask Shareena and millions of women like her and you will hear the same story. They have to be more focused on repaying their debt, sometimes as often as every two weeks and at high interest rates, than on investing in growing their business.

Beyond Micro

They are now barely skating on the edge of poverty instead of being mired in it, but are having to run really hard just to stay in place. Microcredit produces micro income, and there's often no place beyond micro for women to go. Shareena could never access the $5,000 loan she would need to scale up her business because of the social and legal barriers she faces as a woman: She does not own property, she has poor financial literacy, she cannot access bigger markets for what she produces, and she cannot easily leave her family to travel.

There are more than a billion people worldwide living on a dollar a day or less, the majority of whom are women. Seven in 10 of the world's hungry and two-thirds of the world's illiterate are female. We are not going to reach all of them with individual $100 loans, nor is every woman living in poverty going to be a small businesswoman. There's not enough microcredit, and microcredit is not enough. The scale of the problem demands solutions that answer the questions: Where is decent income for a billion people going to come from, and how can we make sure women get access to that income? The latter is important, because a country's macroeconomic and GDP growth does not automatically translate into gains for its poorest women.

In my years of advocacy, I've come to believe in the silver bullet that can empower women and help the global economy at the same time. Women carry it in their blouses and drawstring pouches, and stash it under the mattress. It's cold, hard cash, and women need more of it. Money in women's hands is what pulls communities out of poverty. All the aid and service-delivery programs in the world don't come close to the transformation that happens when women have the wherewithal to feed their families, buy medicine, and pay even minimal costs of education for their girls and boys.

Fostering Opportunity

We're often presented with the false choice of "Is it the private sector or the government or aid that will help the poorest?" A truly visionary plan for women's economic opportunity, I believe, has to include all of the above. Country and donor-government policies that make the right social investments, prioritize trade and investment in certain areas, and incentivize inclusive and sustainable growth are the foundation upon which private enterprise can be built. Eventually, we want to be in a place where aid is no longer needed but the right institutions and structures are in place for the local economy to flourish and for the poorest women to meaningfully participate in it.

There are things both the U.S. government and American businesses can do now to ensure that as the global economy recovers, women are participating in that recovery.

Start where women are and invest in scaling up. It's past time for women to move beyond micro to owning small and midsize businesses. Such women-owned businesses could generate a real income for the women running them as well as create employment for other women. With more employment and income, local economies start to flourish, creating more demand and more business. For women's businesses that have hit a ceiling with local demand, we need to help them access regional and global markets. Women need the training, the legal reforms, and the capital it will take to move beyond micro.

Focus where women do the most work. The vast majority of the world's women live in rural areas and focus on agriculture. While Americans might think of agriculture as "a man on a tractor," in fact, most of the world's food is grown by women on plots of land no bigger than the average American suburban yard, often irrigated one watering can at a time. There is much talk of a second "green revolution" that's needed to feed a growing global population.

But much of that could focus entirely on agribusiness and completely bypass women unless it encompasses areas that affect them: land and legal reform, too, so women can legally own title to land; training; access to seeds, technology, and water; opening up local, regional, and global markets to agricultural products; and investing in cooperatives and other successful agricultural business models so that the only options for women are not either subsistence farming or low-paying jobs in industrial monoculture.

Create market access for women's products. There are a number of industries where women workers dominate—textiles, for example, where one woman's job is said to support families of up to six or seven members. Global trade has the potential to help lift millions out of poverty through the creation of decent sustainable jobs for women, but only if government policies incentivize the creation of such jobs. And when changes in global trade cause women to lose their jobs, be displaced, or need new skills, they must receive transitional assistance and support. Right now, the U.S. still imposes heavy import taxes and quotas on agricultural products that women make, and this should change.

Create places where women can safely keep their money. That money stashed under the mattress is not a way forward for women; it gets lost or stolen and generates no interest. In addition to microcredit, there is a big need for micro-savings, banking, micro-insurance, and a whole range of financial services for the poor, especially women. Women's control over their own income is critical to creating a virtuous cycle of local economic development and poverty reduction.

Many of these things are starting to happen. Agriculture-assistance programs, trade-capacity building programs, and larger-scale finance are beginning to include women, owing to the realization that doing otherwise is ineffective. But their scale is minuscule compared with the demand. Women deserve a chance to access the global economy in a way that betters their lives. And this actually works better for all of us. More money in the hands of the poorest women translates directly into creating the kind of sustainable economic growth that the global economy needs. They have been waiting long enough.

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