The negative impact of micro-finance schemes on women’s economic activity || Newspapers (Arabic)

As Safir reporter Carole Kerbage, published a critical article on the impact of micro-credits on women while reviewing the relationship between clients with micro-finance institutions and the latter with their staff.  The report looks at the situation of a number of women clients of micro-finance who do not have any form of rights or entitlements or collaterals and who had no choice but to resort to micro-credits to improve their financial situation.  According to the report, women who took on micro-credits have had to borrow money from their family members or from other micro-finance institutions so that they are able to pay their debts.  In addition, and according to the author, borrowers now tend to take on micro-credits from several institutions that apparently do not coordinate amongst each other and do not share information.  The same report alludes to the growing trend of using micro-credits to pay essential household bills such as school fees and utilities as well as essential health services.  Such stories are not often cited in the reports of lending institutions which focus solely on “success stories” that emphasis a repayment rate of 99% often cited by these institutions.  Such indicators are used by lending institutions as indicators of success in combating poverty.
The author notes that such micro credit scheme claim to use flexible and minimal collaterals but in reality have not succeeded in reconciling their concerns about financial benefit and with their combating poverty agenda.  Belated repayment by clients is due, according to micro-credit institutions, essentially to personal circumstances thus ignoring more structural causes related to the context and situation of the informal sector and its overall vulnerability.  Within the same framework, the report indicates that micro-credit system is based on the practice of immediate repayment which does not favor productive projects that require a longer time frame to mature and expand in addition to a penalty system which is quite stringent in dealing with poor clients who default on their payments.  The latter includes court cases where borrowers have to pay for legal fees incurred by the micro-credit institutions.  Such penalties are applied even in cases of natural disasters and armed conflicts.  The report also indicates that micro-credit institutions normally do not offer services which allow the clients to improve their management and production skills and capacities.
With regards to the relation of staff members with micro-credit institutions, the report indicates that the latter use a system of monthly incentives whereby staff need to reach a monthly target of clients otherwise they risk losing their jobs.  As such, staff members become obsessed with securing clients regardless of the possibilities for success.  In addition, the report notes that some of micro-finance institutions are in fact registered as NGOs which makes them eligible to attract grants whereas others are duly registered as profit making outfits and those aiming to attract investors. The article concludes that in both cases profit is the main driving force.

Source: Al-Safir 27 December 2012