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| 1. Credit only versus credit and training? Berger states that development planners are divided over whether microcredit programs should provide only credit or other kinds of assistance as well. Training can make small borrowers more competent in business and more capable of loan repayment. Women, in particular, need additional training because of educational deficits. But there are drawbacks: Additional services raise program costs and do not guarantee success. Providing training may divert organizations away from the administration of credit and blur definitions of program success. Making training programs a requirement for loans places additional burdens on women's time and resources, can reduce the demand for loans, and can affect their businesses. Berger notes that programs offering only credit were just as successful in raising borrowers' incomes as programs also gave technical training. A solution to the problem of how to mix credit and training is unclear. Berger suggests a separation of these 2 programs. 2. Sustaining credit flows. Berger states that microenterprise credit programs have been more successful in avoiding default than commercial banks and other credit-granting schemes in developing nations. There is evidence that women are more reliable borrowers than men. But the financial operation of these credit schemes is precarious, since they may be unable to sustain flows of credit. Microcredit programs should be self-sufficient, says Berger, but it is uncertain whether they will recover all their costs. She suggests that credit programs be run like commercial banks. Interest rates should not be artificially held low for small borrowers, since this is harmful to the financial system and may limit their expansion. The most successful microcredit schemes are those that are operated like banks, that target particular activities or sectors, and which progressively increase their scale of operation, says Berger. 3. Graduating to formal credit sources. Berger notes that there is often the expectation that participants in microcredit programs will, with time, eventually be able to take loans from commercial banks. This is unrealistic because Few microenterprise credit programs run by nongovernmental organizations (NGOs) have been able to build permanent bridges to formal credit sources. Small borrowers also have little incentive to make this change, since they already access funds from microcredit programs. NGOs may wish to keep the most successful and reliable borrowers in order to make their operations sustainable. Banks may see no additional profitability being associated with graduating from a microcredit program. Bridging the gap between banks and microcredit programs may be a role best suited to specialized "brokering" programs, which can bundle together small loan applications for a fee. 4. Starting new businesses or building old ones. A central policy decision for organizations operating microcredit programs is deciding on whether to support new businesses or already existing ones. Supporting economic activities in which women already participate has immediate benefits. Women involved in these activities have knowledge of these businesses, and many women will participate in them. Supporting new types of business activities increases the long-term involvement of women, improves their access to credit, and so improves their economic situation. Development organizations can help create the conditions for new forms of economic activity. Credit programs can "steer" women's economic activities into "non-traditional" activities, which may be more lucrative in the long run. There are costs and risks, however. Experiences with such long term development approaches have been mixed or unsuccessful, and more experimentation is needed, Berger says. Developing a consistent program for providing credit to poor women's microenterprises in developing nations is difficult. Women may need more than credit, programs may need to be more flexible about supporting new businesses, and development agencies and governments should seek to maintain successful programs and ways to integrate the formal banking sector. There may be other policies that governments can implement to increase women's access to credit in developing nations. Citation Berger, Marguerite. 1989. Giving Women Credit: The Strengths and Limitations of Credit as a Tool for Alleviating Poverty. World Development, vol. 17, no. 7, pp. 1017-1032. |
