Is there really a "glass ceiling" for women microfinance

clients?
Where MFIs serve female clients through group-lending methodologies, how much do we
really know how these services meet their needs? After all, as their businesses grow and
their lives changes, clients' needs for services also change. Many MFIs offer individual loans
in addition to group loans - but are these really designed for clients that started out in group
programmes? Kuhn-Fraioli notes that "most MFIs that offer both individual and group loans
find that the percentage of women in their individual lending programmes is much lower
than in group programmes. Further, few poor women in group programmes are graduating
to individual programmes and larger loans, suggesting a need to look more closely at how
MFIs can support women's business development."
For example, a study of the Sinapi Aba Trust (SAT) in Ghana revealed a number of barriers
to graduation to individual loans. First, solidarity group clients cited insufficient capital and
lack of assets as the primary constraints to business growth. Second, small loan sizes didn't
allow them to make lump sum investments - and SAT's rules even prohibited them from
using their loans to buy needed business assets. These findings were supported by an
earlier impact assessment, which showed that very few clients acquired assets during their
time with SAT.
To address these problems, MFIs need to design services that protect and promote women's
livelihoods in a way which builds their assets, knowledge and skills needed to grow their
businesses, and provide appropriate support for their changing needs every step of the way.
In doing so, MFIs need to understand how gender roles shape women's business
opportunities and decisions, and ensure that the services and training provided opens up
new opportunities for them.
Synthesised from: Kuhn-Fraioli, L.; "Chipping away at the glass ceiling: Identifying and
overcoming obstacles to business expansion for women"

All three institutions are widely perceived as successful judged by the primary performance
criteria of outreach and self-sufficiency, and all have excellent information available about their
activities. However, while prominent examples, these are not the only successful RFIs. Several
other promising rural financial programmes have emerged during recent years.
Summary of main features:
• Favourable macroeconomic, agricultural and rural policies
• Adequate investment in the physical and social rural infrastructure
(BAAC, BRI)
• High degree of management autonomy in the formation of operational
policies
• Staff policies that stress training, accountability and reward through
monetary incentives and promotion.
• Innovative, low-cost distribution systems and mobile banking
• Innovative and flexible loan terms and conditions.
 • Close monitoring of loan performance; high collection rates and low
arrears
• Domestic savings mobilization as a growing source of funds, resulting in
diminishing or eliminating the need for donor funds
• Positive and often relatively high on-lending rates
• Control over administrative expenses.
• Advanced management information systems (MIS) which facilitate
effective planning, control and timely monitoring of loan repayment

Bank for Agriculture and Agricultural Cooperatives (BAAC),

Thailand
BAAC was founded in 1966 with the primary objective of stimulating agriculture by extending
financial services to the agricultural sector. It replaced the Bank for Cooperatives whose funding
was limited and whose lending activities were restricted to agricultural cooperatives only. BAAC
operates as a state-owned bank under the supervision of the Ministry of Finance and is restricted
to lending for agricultural-related activities only.
BAAC enjoys privileges aimed at stimulating lending to agriculture. For example, BAAC is
exempt from certain taxes (including income tax) and from reserve requirements on deposits.
The Bank of Thailand requires that commercial banks invest at least 20 percent of their deposits
in agriculture, either directly or through BAAC. Banks have opted mostly for the latter,
providing BAAC with access to a large and consistent source of funds while the administrative
costs associated with mobilizing and servicing these deposits were borne by these banks and not
by BAAC.
With regard to setting its operational and financial policies, BAAC generally enjoys substantial
autonomy. BAAC's efforts have been directed mainly at the low to medium-income range. This
strategy has been supported by a progressive interest rate policy and cross subsidization, with
higher interest rates being charged on larger loans, ceilings on loan amounts, and lending to
small farmers without traditional collateral through joint liability groups. At first, BAAC lent
mostly through large agricultural cooperatives, but repayment problems led BAAC to
significantly increase its lending directly to individual farmers.

The Village Banks (BRI-UD) of Bank Rakyat Indonesia (BRI)

Real GDP growth in Indonesia has averaged 6.8 percent during 1990-1994. This growth has
resulted in an increase in demand for credit which contributed to the rapid growth and success of
the Village Bank programme of BRI.
BRI is a state-owned bank which ran a programme of directed subsidized credit for rice farmers
until 1983. The Unit Desa (BRI-UD) or Village Bank, was established in 1984 as a separate
profit center within BRI, under a General Manager who reports directly to the BRI Board of
Directors.
BRI-UD consists of a nationwide network of small village banks. The founding objectives of
BRI-UD were to replace directed agricultural credit with broad-based credit to the rural
population involved in any type of economic in any type of economic activity; to replace
subsidized credit with positive on-lending rates with spreads sufficient to cover all financial and
operational intermediate costs; and to provide a full range of financial services (savings as well
as credit) to clients. All these objectives were achieved only a few years after the programme's
inception, and BRI-UD's phenomenal success in savings mobilization became its distinguishing
achievement. Various other financial institutions including the Badan Kredit Kecamatan (BKK)
which targets the extremely poor rural population are operating along similar guidelines in the
Indonesian rural lower-income market.

Grameen Bank
Grameen Bank (GB) was started as an experimental project in 1976 by Prof. M. Yunus in the
village of Jobra. The project was financed by a commercial bank, and was personally guaranteed
by Prof. Yunus. In 1983, GB was established as a specialized financial institution under the
Grameen Bank Ordinance. The Grameen Bank is not subjected to the Banking Companies
Ordinance or to any other law related to financial institutions in Bangladesh nor is it subject to
interest rate ceilings. It has been partially insulated from other government policies. Today, the
GB is 92 percent owned by its members, the remaining is owned by the government.
Its main goal has always ben to improve the conditions of the rural poor by providing them with
access to credit, savings facilities, and some nonfinancial social programmes. Since its focus is
on the lowest social strata, the income level of its clientele is lower than that of BAAC and BRI-
UD. Because of the low incomes and lack of access to traditional collateral, lending is done
exclusively through joint liability groups, tied to compulsory savings. GB has achieved
phenomenal success with this approach, that has generated replication in many countries.

More information on Grameen Bank can be found elsewhere on the Informal Credit Homepage
 Short Takes
Examples of good practices from all over.

In Africa:
• A women's club formed and operated a revolving loan fund.
None of the officers of the club had any special training for her job. The treasurer,
for example, had a primary school education. But she had not studied accounting.
They had the books set up by an accountant. The treasurer keeps a careful record
of the group's loans and payments. And the accountant reviews their books every
month.
On a Pacific Island:
• In one community, women started small and expanded their business.
They saved their money as a group. They then brought a truck and started selling
transportation services, in an area where there was no service at all. BAsed on
their success, they are buying more trucks to lease to others as a first step. As a
second step, they are starting to transport fuel as an extra service, and sell it to
their customers.
In Africa:
• One women's group explored the possibility of having the local bank in each
district handle the application procedures for its funds. They wanted to encourage
the villagers' knowledge of, and trust in, the local bank.
In Asia:
• The organizers of one large loan programme know their group very well. They
know, for example, that almost all the women borrowers cannot read or write.
They know that they are from 20 to 40 years old, have several children, and that
some are sole family supporters. Regarding their businesses, they know that the
women have nowhere else to meet their needs for funds to buy tools and raw
materials and to fix up their selling stalls. They can therefore tailor their
programmes to meet the women's needs.
In Asia, Africa and Latin America:
• Groups with funds find illiteracy common among their members. So they develop
useful approaches.
One uses picture books to explain the local fund, and how it works. Another
issues special identification cards to each members, with her picture in it. When a
woman signs for a loan, she puts "X" and her card number. A third fund has the
literate women keeping the accounts of the fund, while those who cannot read
hold the cash. They all know their groups and make best use of their situations.
In Africa:
• Attempts to organize two businesses, one group and the other individual,
emphasized the importance of economic and social conditions to one african
group. Some of the lessons they learnt:
 1. Always select a product or service with strong local demand.
2. Put the chosen product or service to a careful and long test of
continuing sales.
3. Use every available agency or individual resource, without
creating permanent dependence on them.
4. Keep the project design simple, especially in the early stages.
5. Use paid staff to do careful organizing, or else it will not get done.
6. Build on the long-standing traditions of women in forming clubs in
the course of forming a new one.
In the Pacific:
• The organizers of a fund reported that organizing and developing group
businesses took 60% of their staff time. So they shifted to working with small
family businesses only. This turned out to be a very good thing for them. They
could help many more businesses than before.
In Asia:
• A group business turned out to be the best solution, because it overcame many
problems the smaller individual businesses had. Several women had been making
rice noodles in their homes, but faced problems of hygiene, high demand and low
quality. The thirty women re-organized into a large production unit, and gained
much better control over production and marketing.
In Asia:
• A rural home improvement extension agent got the idea of a cattle project among
16 women. She started by visiting all the women monthly. Soon they had their
own monthly meeting. While the rural agent still attended, the leadership had
shifted to the women themselves.
In the Pacific:
• One woman, a real leader, started by going from house-to-house each evening, her
way lighted by a lantern, since there was no electricity in her village. She knew
she was being laughed at, at first. But she was rewarded by the unity of the group
that formed over time, and their business activity.
In Africa:
• A revolving loan fund there set a very broad long-term goal: improve the well
being of low-income people in 60 villages. Short-term, they planed to work with
groups of women in helping them finance and manage their business projects.
In Latin America:
• A loan fund set as one of its long-term goals that the sponsor organization would
run the revolving fund for three years. But, during that time, group members
would be trained to take over. Long-term, within three years, the village women
will assume management of the fund.
In the Caribbean:
 • A group of fund managers there feel strongly that limiting project selection to a
narrow group of businesses was essential to their success. Why? They said that
the very fact of bringing people who have been outside the banking system into a
credit system requires time and attention to much detail.
In Africa:
• Experience from one fund in Africa is helpful. There, a government agency
sponsor undertook to establish a revolving fund women. While things worked out,
they now know that formation of the fund required much more time and technical
knowledge than they had at first anticipated. In short, they had underestimated
the commitment necessary and overestimated its ability, especially in procedural
details for setting up the loan system.
In Latin America:
• A voluntary organization found a sponsor for a loan program. They put together
an advisory board of government and private people to assist. That way, they
could draw on many resources, of many organizations.
In Asia:
• Out of her own personal commitment, a prominent businesswoman worked with a
group of women slum dwellers over a long time. The group knew what it wanted.
She helped them to say it, and to plan the action. And since she was connected to
the local banks and businesses, she was able to help them draw on the larger pool
of resources and talent in the town.
In Africa:
• One program states a very clear policy on management and technical assistance.
They say: after a period of three years of assistance, the women entrepreneur shall
be required to pay for all assistance given to her.
In Latin America:
• One fund has an extensive training program for fund directors and managers, as
well as group members. They use case studies and coursework to learn
accounting, budget control, control of defaults, how to use borrowed money,
financial planning, promotional methods, human relations etc.
In Asia:
• One group says that any woman who has at least ten customers in her business
can become a group member and apply for a loan.
In Latin America:
• One group defines its membership to include women who have been in business
at least one year; women between 21 and 60 years of age; women who are
members of a solidarity group; and only women who have a reference from a
person in the community who is not already a member of the credit group.
In Asia:
• One programme which is flourishing now required long preparation by its
organizers. Led by an extremely devoted woman, they held many meetings. They
 had a real plan and a strategy. They knew the neighbourhood women already had
many contacts through trade union membership. They could identify possible
leaders in each area. They were familiar with the economic activities of the
women. And they had a good sense of their credit needs. While many
explanations and meetings were required, the organizers had real possibilities to
assist women.
In Asia:
• "The crowing of a hen not only will cause the fall of a home, but it will ruin the
whole village ... " (old saying). Thus felt the village elders in one town about the
women's organizing efforts. The women made an opportunity to explain their
efforts to the village during a happy feast day. And they managed to change the
minds of those doubted their work. Now they have applause rather than ridicule.
In Latin America:
• The Loan Review Committee of one cooperative is composed of three members
of the co-op, and they rotate them regularly. Their advice: A good credit
committee studies each request well. They put aside decisions on requests that
involve arguments, and they never give credit for an amount bigger than the
member is able to pay back.
In Latin America:
• In order to apply for a loan, the club women have to receive training relate d to
their project. They then develop loan proposals which are reviewed according to
the fund's lending criteria. Once a loan is made, government field coordinators
provide regular support.
In Asia:
• In one effective program, the whole group reviews every loan application. And
the group leader must agree to guarantee the loan being proposed. This program
finances no new businesses.
In Latin America
• Several funds use the system of group guarantee for loans. One person is made
responsible for collecting payments and delivering them weekly to the fund. Since
everybody guarantees everyone else'S loan, there is good reason to pay.
In Asia:
• One very effective fund, with a a high level of group participation, developed its
own approach to meeting costs. They decided that each member should pay a
small entrance fee and monthly subscription. They use the money to cover part of
their rent payments and all travel expenses.
In the Pacific:
• One fund has been experimenting with ways of reducing its expenses. Rather than
using paid staff to check loans, they are using community volunteer leaders to
help out.
In Africa:
 • One fund set up procedures for immediate deposit of funds received in their local
Development and Savings Bank.
In Latin America:
• A fund there reports that the entire application process for a first loan for a
borrower requires an average of three weeks. If that loan is repaid successfully,
further loan requests take only one or two weeks, because then they know the
borrower and her credit situation and habits.
In Africa:
• One fund developed real techniques for learning from experience. Finding that
many borrowers were falling behind in their payments, they started analyzing
their delinquent loans regularly. They discovered that their terms were unrealistic
generally for their borrowers. The women simply could not save enough from
payment-to-payment, to meet the schedules. They adapted flexibly by changing
the terms. But they continue to examine what they have done, to try to do better.
In Latin America:
• As group members learned to use credit from a fund, they also learned how to
control the cash flow in their own businesses. Result: the businesses started to
grow - their capacity to use credit properly also increased, as did their business
abilities.
In Africa:
• Women's initiative is everything! It should be demonstrated in a project before
lending. In one goat-raising project, several women put their small savings
towards raising a herd. One member of the group, trained in animal husbandry,
kept the herd. A local veterinarian assisted with advice. And the local market
proved to be good. The women worked out all the details and sold the goats.
When the time came to expand, they sought out fund money for that.
In Asia:
• To check on loans, one large fund maintains a Recovery Section, with a team of
field workers. They follow up on loans to make sure that the money is spent in the
way the owner said she would use it.
In Latin America:
• One programme hires collectors with cars to travel on a weekly basis to pick up
payments. They pay them 1% of the total collections. In another case, the
excellent lending and repayment record of one programme stems from the fact
that all the group's officers and leaders are also group members. They are very
aware of the credit needs and problems of their members. And they are highly
motivated to push for repayment, as needed.
Abstracted from: "A guide to community revolving loan funds" Voluntary Fund for the UN-
Decade for Women