In La Libertad municipality in El Salvador, Dominga Granados was struggling to raise four children. Her husband usually earned $200 a month for the family working in construction, but his income was always unstable. She was looking for a new way to support her family.
In Rwanda, Fébronie Nyiraminana was also struggling to raise her five children. At the same time, her husband hit her everyday, telling her that she was worthless and that all she did was eat. Feeling belittled by her living situation, Nyiraminana needed a way to restore her dignity.
Microcredit financing has allowed both Granados and Nyiraminana to begin improving their situations. This local banking practice provides small, trust-based loans to small entrepreneurs, helping people all over the world pull themselves out of poverty and build their confidence. Small loans, often under $100, are enough for hardworking individuals to start or expand a small business: the funds allow them to purchase the necessary materials to produce their own goods, to buy items wholesale and resell them in markets, to raise livestock, to practice artisanal crafts and trades, and to maintain farms. The resulting income provides entire families with better food, housing, health care, and education.
Having been in the practice of making tortillas for 11 years, Granados came up with the idea of opening up a tortilla shop in her home. In May of last year, she was granted a $900 loan, which was used to purchase ingredients to make tortillas, enabling her to look after her children and to work at the same time. Ever since July, she has been paying back the loan at a slow but steady rate. Today Dominga has repaid 75 per cent of her loan and her business continues to grow.
With a loan of $40, Nyiraminana was able to invest in charcoal, resell it, and thereby earn enough money to buy clothing for her children. “We eat until we are no longer hungry,” she writes in a testimonial. “I can buy medication and cover tuition costs for my children.” Now that Nyiraminana is earning an income, her husband no longer abuses her, but respects her and says that she is very useful to the family.
Despite Granados’s and Nyiraminana’s success stories, microcredit’s critics point out that these small loans can be harmful to the borrowers, their families, and communities. In an interview with Amy Goodman on Democracy Now!, Vandana Shiva, world-renowned environmental leader, physicist, and ecologist questions whether these loans did in fact liberate the borrowers. It is “a debt trap sucking people into permanent dependence on more and more borrowing,” she argues. Microcredit malpractice disempowers individuals by robbing loan recipients of their financial independence and of their productive capacity, according to Shiva.
Shiva has said that the capitalist nature of the Graheem Bank microfinance model poses additional threats to local economies. Microcredit can make harmful resources, such as genetically engineered seeds, available to entrepreneurs, she explains. Moreover, microcredit is being used to turn autonomous and sovereign producers into consumers. “Women who were [once] producing their soaps and their potato chips are today sellers of Lever’s detergents,” says Shiva.
Shiva’s criticism highlights an important characteristic of microcredit: loans are usually given to women and often take advantage of domestic skills like cooking and sewing. Women in the developing world are doubly disadvantaged: not only do they face poverty but also suffer misogyny and have an unequal status in society and in the home. Loans directed at women attempt to provide them with the means for material autonomy and emotional empowerment.
However, many are skeptical that these goals are in fact realized. In “Who takes the Credit?” Goetz and R. Sen Gupta argue that women can end up collecting money for their husbands, brothers, and sons while putting their own credit at risk. Still, microcredit should be applauded for its efforts to close the gap between men and women in the developing world.
Further criticism asserts that large financial institutions take an interest in microcredit not for its potential for good, but because of its potential to turn a profit. “Microcredit is becoming a macro-racket,” writes Alexander Cockburn in Counter Punch, a political newsletter. “Today the World Bank and the IMF, along with state-owned and commercial banks, are diving into microfinance. The microloan business is fast becoming a gigantic empire, bringing back into control the very banks and bureaucracies women have been trying to bypass.”
Microcredit has the potential for harm, but at the same time it has the potential to be an empowering tool. The agents of microcredit and their motives ultimately determine whether individuals, such as Granados and Nyiraminana, are able to utilize their inherent capabilities.
Muhammad Yunus, the founder and white knight of the microcredit movement, connects the practice with the idea of social business. In his 2006 Nobel Peace Prize acceptance speech, Yunus defined social enterprise as “a new kind of business introduced to the market place with the objective of making a difference in the world.” This idea expands on capitalism’s profit motive, adding the new incentive of positive social change.
Yunus predicted that “young people all around the world, particularly in rich countries, will find the concept of social business very appealing since it will give them a challenge to make a difference by using their creative talent.” Today, in Vancouver, the creators of Global Agents for Change (AFC) are proving Yunus right. These young people are committed to finding sustainable solutions to poverty and recognize microcredit as a tool that helps individuals realize their potentials and, in turn, help their communities.
This is where Granados comes into the picture. When she needed funds for her tortilla business, she went to Integral, a microfinance association located in El Salvador, to ask for a loan. Integral then uploaded a profile of her onto Kiva, a web site that provides a platform for borrowers to post their stories, pictures, and business goals and needs. Through its Kiva account, the AFC Opportunity Fund committee was able to choose to lend directly to Granados among the many other potential loan recipients also on Kiva.
“Microcredit…gives a hand-up rather than a hand-out,” explains Yassaman Nouri, an AFC member who worked on the Kiva account – the organization’s first large loan. She was first incited to learn about microcredit from an interview of Yunus.
“It gives them the financial support to expand on [their skills],” adds Nouri. “It helps the loan recipients be independent and build a self-confidence that will allow them to use their skills to create something for themselves, their family, and their community.”
A growing organization, AFC is currently working on building an experienced advisory committee to improve the AFC lending process. “That way, we’ll make sure that the projects we’re helping will make a bigger difference in the long run,” says Yassaman. “The decisions that we want to make are not ‘band-aid on a wound’ solutions, but actually healing the wound.”
On the other side of the world, Jeanne Mwiriliza, a Rwandan genocide survivor, founded Tubahumurize, an organization committed to helping traumatized women. Microcredit loans are an integrated part of the non-profit organization’s mandate, helping women to overcome their torn and battered sense of self.
“To understand just how significant a financial contribution can be, you really need to understand the context in which the women were living,” says Simone Helene Hanchet, a Montreal student who interned at Tubahumurize. Today, the Rwandan women who survived sexual assaults during the genocide are still haunted by events that took place 16 years ago. Their trauma subsequently lowers their self-esteem and diminishes their confidence.
Noticing that these disenfranchised women needed consolation, Mwiriliza started an informal prayer and support group with the purpose of helping women relieve their suffering. The counselling provided women with someone to talk to help overcome feelings of isolation. However, when the group developed into a formal non-profit organization, Mwiriliza began to notice that trauma counselling was not enough. “Once that process is underway and women are feeling better, they need something to do. They need support,” says Hanchet. “The director realized that the women cannot be helped in only one sphere without being helped in another; you cannot help them emotionally without helping them practically.”
Mwiriliza began to raise funds to start a microcredit program within the organization. She received funding and was able to train in Bangladesh under Yunus. As a result of Tubahumurize’s program, the lives of those who have received loans have changed dramatically. “What they heard when they received the money was ‘We believe in you and we think that you’re capable of something,’” says Hanchet. “Paying back their loans was a huge sense of pride; they would dress up really fancy whenever they would come into the association to finish paying back.”
For Nyiraminana, also a rape survivor, microcredit dramatically changed her domestic relationship. “When a woman is earning money, she has more power in the home. And when she has more power she has more confidence. It’s a real source of pride for her not to have to ask her husband for money if she wants to buy something like pencils for the children,” explains Hanchet.
“In the context of the work that I was doing, I would say that the main purpose [of the loans] was not only financial or economic,” says Hanchet. Unlike traditional microcredit models, whose main purpose is to provide loans to the poor, this grassroots organization was originally established to help traumatized women, many of whom are HIV-positive, survivors of rape, widows, extremely poor, or uneducated. Hanchet reports the unfortunate reality that almost all of Tubahumurize’s beneficiaries fit into several of these categories.
Because Tubahumurize’s activities aim to support individuals develop a sense of dignity and happiness, Hanchet doesn’t see it as a failure if a womanis not able to repay her loan entirely within the set timeframe. “Because working made her feel better about herself and helped her help her family. This in itself makes microcredit a success for these women,” she says.
Nouri, Hanchet, and other agents play an important role in social business because their incentives are sincere and pure: they have no high financial nor economic interests at stake other than aiming to do good in their world. The support that individuals around the world who are capable of providing ought to be acknowledged and valued since it is this human sincerity toward one another that keeps us human in the end. Microcredit is a tool and it is up to the user to help rather than to harm.
For more information about Tubahumurize, email firstname.lastname@example.org. For more information about Global Agents for Change, visit globalafc.org.
Check out the benefit concert BENEFEST – a fundraiser for the Global Agents for Change’s Opportunity Fund – tomorrow at 9 p.m. at Les 3 Minots (3812 St. Laurent).