THEME: Women are not willful defaulters, but may not make payments on time for a number of other reasons.

A 1996 evaluation of an IFAD supported project in Nepal found a steady decline in women's repayment of production loans. The recovery rate declined from about 75% for 1991/93 to 35% or 38% (by various estimates) for 1993/94 in the 37 IFAD supported districts. A number of reasons were noted.

• The rapid expansion of credit overstretched the ability of staff to collect payments. The accelerated credit disbursement was facilitated by lack of accurate and verifiable data on level and trends in credit recovery.
• Women were encouraged to undertake enterprises which were not profitable, such as goat raising. While often profitable, in this area goats have a high 30% mortality rate and nearly all women interviewed by the evaluation team reported the death of at least one goat. With livestock insurance, households may break even, but would not receive compensation for labour inputs.
• Field staff did not have skills for assessment of enterprise profitability and therefore could not give women sound advice.
• Women had poor understanding of contractual obligations and rewards associated with credit. Many women actually said that they were not aware of their repayment obligations. Others did not know of late repayment penalties and early repayment rewards. Only 60% of those interviewed by the evaluation understood the basic joint and several liability concept which meant that if they did not repay, their loans would be recovered from other members of the group.
• Women had a hard time remembering their repayment dates because of inadequate information from the bank and lack of reminders from group leaders or field staff.

• The very large majority of women participated in group saving schemes. The design of the IFAD project had foreseen that group savings would serve as a reserve for loan repayment. However, in practice, group savings were rarely used for repayment of overdue loans.
• Repayment schedules were not in line with women's cash earning possibilities. In Mustang, for instance, borrowers can not be expected to repay during the harsh winter months because there are insufficient funds available in the cash-flow cycle to service them. Any small amounts of cash available is used for food.
• Although many were cohesive, there were irregularities reported in some groups, including misuse of money collected for repayment.
• A few women reported problems due to their husbands having spent the loan funds on alcohol.

Income generating activities varied in terms of rate of default. This suggests that profitability is a major factor associated with repayment. In all, women repaid 45% of livestock loans. Nearly one fourth of the total portfolio outstanding and 46% of the amount due and payable, was reported overdue at the time of the IFAD evaluation. It is interesting that whereas there was highest mortality rate among goat enterprises, only 14% of these were overdue. In the case of mortality, the owner still had to repay 20% of the loan. However, all loans due and payable for cow-heifers, pigs and poultry were past due. But none of the few borrowers for milking buffalo had overdue loans. The rate of repayment was much better outside livestock: all due loans taken for crops such as ginger, potato and oilseed had been repaid on time, as had loans for cottage industry.

But women were not found to be willful defaulters. All reported intention and ability to repay their loans, including those that were overdue at the time of the evaluation. The latter were planning to do so through:

• Generating cash for repayment through work as farm labourers.
• Disposing of unproductive and/or new born livestock.
• Cutting back on expenses to save money.

Low profitability of enterprises, and poor access to needed information, are two main major causes of default among women borrowers. But poor loan initiation and administration is clearly also to blame.

Adapted From: IFAD/OE, Production Credit for Rural Women: Interim Evaluation, Main Report, Rome: IFAD, February, 1996.

IFAD Projects in Nepal