A question that comes up a lot from tour participants on the En Vía tours is: Why do we lend only to women? As Kim discussed in the blog post (“Acknowledging Relationships: The Support from Men”), even though we work primarily with women, men do form a vital part of the communities in which we work and we aim to be inclusive and aware of how they support their wives, mothers, sisters and daughters throughout the loaning process.
Our policy of lending exclusively to women has its roots in the global microfinance for development movement which started in Bangladesh in the 1970s. Microfinance is the provision of basic financial services to those who lack access to the formal financial sector due to high interest rates, transaction costs and their own lack of cash income and assets to offer to a bank as collateral. Moneylenders charge higher rates to poorer clients. In terms of the informal financial sector, in Mexico the average microloan is 70% (this is the highest in all of Latin America!), and can reach as high as 150%.
The aim of the microfinance for development movement was to enable these financially marginalized people to invest in small businesses and consequently to lift themselves out of the poverty trap. The microfinance movement originally supported the businesses of both men and women. Later it was found that women borrowers had good credit ratings and so some microfinance institutions started lending exclusively to women clients.
Research shows that credit offered to women has a strong impact on the quality of life of their family and we particularly value this aspect of microfinance at En Vía. Traditionally, female entrepreneurs invest a higher percentage of their income into the household, enhancing the family’s financial security and consequently access to housing and healthcare. On average, women put 20% more money into savings than male borrowers.
Furthermore, statistics indicate that women invest more of their business profits in the education of their children. Studies on microfinance show that children of women borrowers are more likely to attend school full-time and have a lower dropout rate.
En Vía sanctions women’s right to have access to financial services. We recognize that women’s participation is central to the success of any development model, and that women can use microfinance as a tool to achieve their own goals.
We believe that the ability to generate and control one’s own income can be empowering. Our borrowers are savvy businesswomen, with a variety of skills and business ideas. In the free business classes that we offer as part of the loaning process, we emphasise that the women must take complete ownership of the loan. We notice that many of our borrowers become more assertive and confident, and take a great pride in the successes of their business during and after the loaning process. Their independence also provides a powerful example for their children, and especially girls.
Gloria, one of our wonderful borrowers, makes tamales and sells them in the local market in Teotitlán. She values En Vía’s interest-free loans as they enable her to buy the corn in bulk to make the tamales. This is much cheaper than buying a little bit, every few days. Gloria can now buy more corn, make and sell more tamales and consequently make a larger profit. With one of her loans, Gloria bought a wheelbarrow with which to carry the tamales to the market every day. Previously, she had to make two trips to the market from her home up a hill, carrying the tamales in a basket on her head. Quite the balancing act!
Moreover, thanks to the extra security the loans provide, Gloria is able to pay to take her corn to the local grinder instead of grinding it by hand. Grinding by hand takes a long time and is strenuous work – especially for large orders around Christmas time and other festivals. Gloria also finds she has been able to put a little extra away in savings. Some of these savings go towards sending her daughter to high school in a neighbouring town.
En Vía’s model is based on the idea that microfinance can be used by women as a tool for growth and development. We feel very privileged to work with women who have the ambition, motivation and determination to make their businesses succeed on their own terms.
By Helen Lyttelton