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Last Updated: Tuesday, 21 August 2007, 22:59 GMT 23:59 UK
Small loans to women make big changes
By Clare Davidson
Business reporter, BBC News

It all started when Joyce Wafukho, then in her early 30s, spotted a gap in the market in her village in Kenya.

Indian women making handicrafts
Mirofinance helps give women an income and dignity, supporters say

"There was no hardware store," explains Mary Ellen Iskenderian, who first visited Ms Wafukho after becoming head of the non-profit organisation Women's World Banking in September 2006.

"After borrowing from family members and scraping some savings together, she started selling nails and screws from a kiosk."

She also sold tomatoes, "not your standard DIY stock," laughs Ms Iskenderian.

However, she needed more investment. "Try as she did, she couldn't get a bank loan for love or money," said Ms Iskenderian.

But she heard about the Kenyan Women's Financial Trust (KWFT) and borrowed $70 (35).

The money revolutionised her business.

Other benefits

In fact, it did more than that.

The loan also improved the prospects of Joyce's three children considerably, enabled her sister to study for a doctorate and created local employment.

Microfinance can help women, but it can also reunite families
Mary Ellen Iskenderian, chief executive, Women's World Banking

Seven years later, Ms Fawukho employs more than 20 people in her hardware business, says Ms Iskenderian, visibly delighted in recounting Joyce's story.

"This is one of the most exciting parts," she adds. "The 26th person she has hired is her husband. He had left to work in another village as a policeman.

"Microfinance can help women, but it can also reunite families."

'Real difference'

Joyce's story, told during a small event on microfinance at the London Stock Exchange, prompted smiles from investors and academics alike.

Joyce Wafukho
Joyce Wafukho employs over 20 people in her hardware firm

It may be just one Kenyan woman's story, but it makes a wider point about how small-scale loans can empower women.

The Women's World Bank has a network of microfinance institutions helping women on low incomes.

Local organisations can provide support, advice, technology and even space to help nurture a project.

Ms Iskenderian, who spent 17 years at the World Bank's International Finance Corporation (IFC) and has also worked for investment bank Lehman Brothers, talks about how enjoyable it is to meet the women who have secured loans.

"What is exciting is you are making a real difference," she says.

Nobel prize

The idea that providing a small amount of money can make a big difference is not new.

But microfinance schemes have gained increasing interest, especially since Bangladeshi economist Muhammad Yunus and the Grameen Bank were jointly awarded the 2006 Nobel Peace Prize.

Mr Yunus, who founded the bank in 1983, was a pioneer behind micro-credit lending to poor people, notably women in Bangladesh.

"Traditional finance tends not to cater to women - either because the terms of the loans are not favourable or because they are such small fry that most individuals are not worth a bank's attention," explains Ms Iskenderian.

Nowadays, microfinance loans are available in many other parts of the world, from Pakistan to the Philippines. They tend to be given to women, who make up the majority of the world's poor.


Helping women in business activities - whether they want to open a hardware store, sell solar panels or buy livestock - is only part of the story.

It also gives them to chance to put money aside.

"Saving is a huge problem," says Anton Simanowitz, a socio-economist at the Institute of Development Studies (IDS).

If people can save, they can reduce their vulnerability and plan a bit
Anton Simanowitz, socio-economist, Institute of Development Studies

Poor people can and do save at home, but this is often insecure.

However, lending money that is then invested in a small business can create a source of income for the borrower and savings.

"If people can save, they can reduce their vulnerability and plan a bit," adds Mr Simanowitz.

Community investment

One of the most striking aspects of these small loans is the reliability of the borrowers.

Repayment rates in certain micro-credit organisations are about 95%.

What distinguishes men and women when they borrow small amounts is how they choose to spend it, says Ms Iskenderian.

When women are the recipients of microfinance loans, they spread the money around, so the children and the household tend to benefit more.

Alicia Hernandez (L) showing clothes she sells to Mary Ellen Iskenderian (R)
Mary Ellen Iskenderian (R) enjoys seeing the projects develop

Women tend to invest in three things: health, their children's education and the home, she says.

Men, on the other hand, put more back into the business.

And it is not just in the developing world that microfinance has a use, says Paul Barry Walsh, founder of the UK-based Fredericks Foundation, which provides business loans to those who tend to be ignored by other lenders.

These tend to be single parents, disabled or unemployed people - mainly women.

"Microfinance is a very powerful tool that has been grossly underestimated," even in the developed world, says Mr Walsh.

Social roots

Microfinance is far from cohesive and questions remain about how effective it is as a long-term solution to poverty.

Maria Bautista in Mexico
Women invest differently to men

Nonetheless, there has been a growing interest from larger investors who want to tap into this sector.

But this has also raised concerns that the involvement from bigger players could detract from its social aims. Even investment bank Morgan Stanley has been getting involved in microfinance.

"It could become the victim of its own success," warns Ms Iskenderian.

Advocates are keen for the social goals of microfinance to be maintained. "Most people are not entrepreneurs. They are trying to generate income for their families," says Mr Simanowitz. "It is a financial means to an end."

Joyce's story reveals that it is far more than about one woman's business.

If the end - as in her case - means empowering women and their families, it is a hard goal to challenge.

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