Copyright 1994 American Chamber of Commerce of Mexico
Business Mexico

November, 1994

LENGTH: 1374 words

HEADLINE: Banking on women
Efforts to finance female microentrepreneurs around the world

BYLINE: Nicola Cunningham Armacost

The idea of providing banking services for poor women on a global scale
germinated during the first United Nations Conference on Women held in Mexico
City in 1975. Four years later, the idea became a reality when Women's World
Banking (WWB) was officially formed in Amsterdam.

Global leader

WWB was founded on the premise that in order to fully participate in the
economic development of their countries, women need greater access to credit
and other tools of the formal money economy. Working as a local/global
organization, WWB strives to increase women entrepreneurs' access to finance,
information and markets.

WWB is made up of a network of 49 affiliates and nine
affiliates-in-formation found in over 40 countries of Africa, Asia, Latin
America, Western and Eastern Europe, and North America. Each affiliate is an
independent, not-for-profit institution within the global WWB network with
autonomy over decision-making and finances. Over the past 14 years, WWB and its
affiliates have provided finance and business services to over 500,000 female
microenterprise clients. Based on annual self-assessments, about 80 percent of
affiliate clients are poor. Of the total, about 65 percent are self-employed,
and most of the remaining clients operate microenterprises with one to five
employees. While patterns differ by region, about 55 percent of clients
worldwide live in urban areas; most rural clients live in Africa and South Asia.
Most clients are microentrepreneurs operating in a range of sectors in their
local economies. Clients participate about equally in industry, services and
commerce sectors.

WWB affiliates provide their clients with a range of direct- lending,
savings, training and commercial-linkage services. Affiliates have made,
brokered or guaranteed over 200,000 loans averaging approximately US$350 each.
The weighted average repayment rate is over 95 percent, with less than 1 percent
in defaults. The total value of loans disbursed is about US$150,000,000.

Other microcredit sources

Despite the pioneering work of several microcredit organizations across the
world, only about 1 percent of low-income women entrepreneurs who need credit
are reached with the credit services currently available. This is an enormous
challenge for microcredit organizations and for the banking sector.

To increase attention to this issue several key organizations have joined to
form the International Coalition on Women and Credit. WWB acts as the
Coalition's Secretariat and offers administrative and logistical support. The
Coalition's main goal is to provide recommendations to policy makers on the
importance of credit as a mean to economic empowerment and specifically on
increasing low-income women's access to financial services.

ACCION International and FINCA International, both of which operate in
Mexico, are founding members of the Coalition. ACCION is a US-based private
voluntary organization that has been working for 30 years to develop
microenterprise programs. It has a network of 52 affiliate organizations spread
through 13 countries in Latin America and the Caribbean. Many of its
affiliates participate in solidarity group lending. As of 1993, US$199,714,000
had been disbursed in loans, and the average loan size was US$489. The repayment
rate was 95 percent, and 54 percent of the clients was women.

INCA currently has 10 affiliates in nine countries. FINCA and its
affiliates use the village banking lending methodology in their programs.
Village banks are community-managed credit and savings associations, established
to improve poor people's access to financial services. The majority of FINCA's
clients are female microentrepreneurs. During 1993, FINCA made approximately
135,000 loans with an average loan size of US$100; the total amount disbursed in
loans was US$13,000,000. FINCA's on-time loan repayment rate was 97 percent, and
about 97 percent of FINCA's clients were women.

Progress in Mexico

Asociacion de Empresarias Mexicanas, A.C. (ADEM), has been an affiliate of
WWB since April 1992. Located in Veracruz, ADEM began credit operations in '92
with the support of Mexican business, finance and government sectors, including
Nacional Financiera (NAFIN).

In 1993, only a year after affiliation, ADEM had made 138 loans, reportedly
reaching 350 women. The average loan size was US$5,000. No more than 3 percent
of its loans were overdue. ADEM focuses mostly on urban clients in the commerce
and service sectors, and 80 percent of the borrowers have enterprises with less
than five employees.

In collaboration with the development bank NAFIN, ADEM established a trust
fund (the Trust for Mexican Women Microentrepreneurs), set up to service a
previously neglected sector -- women -- and used to leverage the affiliate's
funds: For every one peso the affiliate provides, NAFIN provides 10 pesos for
on-lending to microenterprise clients.

Founded in 1934, NAFIN has the largest network of financial intermediaries
in Mexico, including other development banks, commercial banks, credit unions,
NGOs, leasing companies and factoring companies.

NAFIN is unique in that it actively encourages privatized banks to lend more
intensively to micro- and small businesses. NAFIN has begun providing
microloans to entrepreneurs through its PROMYP program, which promotes and
channels resources to micro- and small enterprises in order to ensure healthy
economic development and improve the productivity, efficiency and
competitiveness of the industrial, commercial and service enterprises of Mexico.

In 1993, NAFIN provided 125,138 loans to micro- and small enterprises, and a
total of US$2,230,000 was disbursed specifically to microenterprises (one to 15
workers as defined by NAFIN). Through PROMYP, NAFIN has channeled US$5.110
billion to micro- and small enterprises. NAFIN does not desagregate its data by
gender. However, given the volume of funds NAFIN provides in loans, even if
women entrepreneurs in Mexico received only 10 percent of these loans, the
impact would will be enormous -- far greater than the current impact of WWB,
FINCA and ACCION collectively in Mexico.

Challenges remain

In order for the financial system as a whole to reach the microenterprise
sector, formal financial intermediaries need to be encouraged to lend to micro-
and small enterprises. These financial institutions must change their loan
procedures in order to reach small enterprises, and they must meet rigorous
performance standards.

More specifically, to expand reach to the millions of low- income women who
need credit to start micro-business, specialized finanical intermediaries like
WWB, FINCA and ACCION must collaborate through collectives (e.g., the Coalition)
and international fora (e.g., the United Nations Expert Group on Women and
Finance). By joining forces and sharing experiences, these organizations will
have the impact they hope for.

Efforts must continue. NAFIN, FINCA and ACCION International were among the
participants in the WWB-led United Nations Expert Group on Women and Finance in
January 1994. Forty global leaders from microenterprise NGOs, specialized
financial intermediaries, banks, government and development aid agencies
produced a consensus report which sets out the case for providing microcredit to
women. The recommendations are clear:

* A range of institutions, large and small, is needed.

* These institutions must meet high standards.

* Institutions that meet the standards need capital, institutional
development and loan funds.

With these measures, millions of women will get the credit they deserve.
Nicola Cunningham Armacost is communications coordinator at the New York
headquarters of Women's World Banking.
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