MICRO FINANCING AND WOMEN ENTREPRENEURS
UNEQUIPPED TO PARTICIPATE IN THE FORMAL ECONOMY
TARIQ AHMED SAEEDI
Apr 28 - May 11, 2008
While participation of women in economic building and in male-dominated professions like military, financial management, and engineering is increasing gradually day by day, economic emancipation of mostly rural and urban housewives has not been achieved at par, cascading ever-rising revenue loss to gross national income of Pakistan. Despite country womenfolk confronts with the cultural and financial barriers in getting themselves economically emancipated, they culpably lack will or valor to take initiatives that would bring changes in their standards of living.
Certainly, working women start contributing in total household income that expands to the extent to engulf burgeoning total expenditures. On the other hand, their improving self esteem results into mental fitness of generation they undertake to nurture. Aside with self employment, they help propelling the engine of informal trade sector. In Pakistan majority of women associated with the home-grown production has minimal or no access to funds that can further grow their businesses.
Either they posses security, which is too invaluable to qualify traditional lending or they are completely unaware about the systematic micro credit facility. This unawareness leads them to local money lenders who have loan attached with an astronomical interest rate in comparison to prevailing market rate. Community help reduces the cost of funding, however, the informality of its financial mechanism would less likely to ensure consistent progress unless formal policies are inducted in. Nevertheless, interestingly informal trade sector of Pakistan predominately gets funds from these local sources, popular among which is bessee/committee that is considered to be a more reliable source of funding, constituted among a particular set of people.
This method of fund accumulation is in fact the mother of modern cooperative saving and is preferably followed by small and medium scale industry. First cooperative saving is known to be introduced in 1848 by Friedrich Raiffeisen. While custom of cooperative saving amongst close knitted group in Pakistan may have far aback origin, it keeps on surviving because of womenfolk whose enrooted characteristic of surveillance lessens the probability of collection and disbursal structural deformation in the pooled investment.
Appreciably, this local method of saving does not only meet money requirement of saver but also is purely based on social rather than commercial motive; it neither provides additional returns on saving nor does it levy any mark-up over withdrawal that is often in advance. According to an estimate, informal sector loans from banks account only for 8.1% while local provision of funds is estimated as an important source of business investment.
Apart from this, women of cottage industry manufacturing for example handicrafts, ornaments, and garment's accessories form the major vertical supply chain of a company. Categorized in the vendor industry, this working class fulfills broad outsourcing requirement and directly cut short organizational additional outlays. Unfortunately in Pakistan there seems no serious effort to solidify the outsourcing base that uncared exists in various houses. Otherwise credit provision on flexible terms could enhance the outputs of informal sector. Similarly, women working in farmlands do not have capital to increase their productivity level through expending typically on storing and preserving perishable produces or on cattle breeding.
A social activist, yet, said missing political will reinforces the undermining process of available resources. Whatever may be reason, gainsaying is the fact that micro financing policies should be revised or be truly implemented to get windfalls of the women's economic participation. This is what has been actually in practice in many developing countries. The well emulating model of micro financing is efficiently and effectively in place in our neighboring country-Bangladesh. Grameen micro financing model has been replicated and reformulated in about 70 countries. Grameen bank of Bangladesh has an outreach to over 2 million people. While initiating the project back in 1976, Dr. Yunus was hell-bent and confident of freeing the have-nots out of the clutches of poverty.
Notably, 94% of its loans are disbursed to women. The selection procedure of borrower is very casual in which social collateral is usually demanded as a loan security. The focus target market of Grameen micro finance is agricultural community therefore land may be mortgaged as a loan security. The worth imitating is the Grameen Sixteen Decisions that have to be recited by debtors and depositors in every weekly meeting. The Sixteen Decisions pledge social safety and environmental protection. Borrowing group becomes guarantor of a member, whose bad debt spoils out profile of entire group. Its credits were found to have impacted largely on girls schooling, women's labour supply, and pedagogy of children.
Helen Todd 1996 study found that Grameen women contributed on average 54% in the net earnings of the household. Women play a significant role in the economic and social development of the country. In rural areas of Pakistan, from where males have mostly migrated in large numbers in search of jobs, many farms are managed entirely by women, who may not have legal control of the farms and are performing simultaneously their household upkeeps. They fully participate in all operations pertaining to pre and post-harvest notwithstanding their contributions go unnoticed and undocumented. Unquestionably, seldom can they present any kind of collateral.
In urban and suburban areas, women also constitute essential components of informal trade sector. In absence of spouse income, these women independently earn bread and butters for their families through self employment. As they have social network not inasmuch as their male counterparts do, they often are unqualified to even micro finance. Since micro credits institutions in Pakistan also avoid lending to first time entrepreneurs, women are relatively affected with the condition. What Lester Thurow of MIT dubbed them is lumpenproletariat that means unequipped and uneducated to participate in the formal economy.