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THEME: Profitability potential and women’s workloads need to be considered if loans are to be an asset rather than a liability.
A
1998 IFAD review of two Fund-supported projects in Guatemala, briefly
looked at the issue of credit. There had been virtually no credit
available in the project communities prior to the project, especially
for women. IFAD support has therefore improved the general access
of households to credit services.
The projects made special efforts to provide women with loans and to promote their involvement in income-generating activities. From this point of view, the results were not very encouraging:
- Large differences were noted in the sizes of average loan amounts, with loans made to women being much smaller. The study viewed this as a result more of women’s lack of collateral for larger loans and of social conventions than of differences in demand. However, evidence elsewhere suggests that it could be both.
- Many of the investments for which loans were taken did not generate a sufficient income for repayment; therefore, money for loan repayment had to come from other sources.
- There was some indication of loss of control over borrowed cash.
- Some of the ventures for which loans were taken were risky or had no markets.
- Where women took up new off-farm enterprises, there was no indication that they received more help for their other responsibilities, resulting in an overall increase in their workloads or their neglect of domestic duties.
- Credit tends to miss the poorest of the poor. This is particularly the case with the larger loans, owning not just to lack of collateral but also to higher risk aversion.
These findings underline the risks associated with focusing credit on women. The impact on women’s workload is also important from the point of view of positive impact on household food security. A loan for a new income-generating activity, or for expansion of an existing one, usually increases women’s workloads. If excessive, this increase can have a negative impact not only on the woman herself but also on household food security and nutrition. This can occur if food crop production, processing or preparation suffers. It cannot be assumed that the other family members will provide help with a woman’s other tasks if the women takes on more productive work. The study found, in fact, that most of the time this did not occur. Another important issue is that of control: ideally the products produced should be ones that women can market locally, therefore retaining control over the income generated.
These findings do not indicate that rural financial services are an inappropriate tool for poverty alleviation. What they do show is that care needs to be taken to ensure that loans do not become a liability, through up-front assessment of actual need for credit, of the profitability of the activities and of women’s workloads.
Adapted from:
Calogero Carletto. 1998. Household Food Security and the Role of Women: IFAD’s Experience in Guatemala. Staff Working Paper Series on Gender and Household Food Security, No. 3. Rome: IFAD.
