The Women and Girls Empowered (WAGE) Global Consortium is excited to announce it has officially completed the Kiva loan matching activity through its Reducing Barriers to Women’s Economic Empowerment Initiative (RBI).
As of December 2021, RBI surpassed its goal of supporting 1,700 women entrepreneurs by 522 percent, funding 10,578 women (roughly 90 percent in El Salvador and 10 percent in Honduras) through the Kiva loan matching fund, which unlocked $5,402,700 in loans since 2019. Women entrepreneurs who received loans represent an array of sectors, including food (38 percent), agriculture (26 percent), retail (19 percent), clothing (10 percent), and many others.
Funded by the U.S. Department of State Secretary’s Office of Global Women’s Issues (S/GWI) and implemented by WAGE Consortium partners Grameen Foundation (Grameen) and the American Bar Association Rule of Law Initiative (ABA ROLI), RBI is WAGE’s first initiative. Launched in 2018, RBI takes a cross-cutting approach to supporting women entrepreneurs in El Salvador and Honduras by addressing barriers to women’s economic empowerment (WEE) with added focus on gender-based violence (GBV) prevention and supporting the women, peace, and security (WPS) agenda. RBI aligns with the U.S. Strategy for Addressing the Root Causes of Migration in Central America by enabling women’s enterprises to grow and become resilient, thereby decreasing economic insecurity experienced by their families and reducing the impetus for migration. RBI simultaneously fosters lasting change by addressing harmful gender norms held by microfinance institution (MFI) staff, making women’s empowerment central to each institution, and supporting them to mitigate unintended consequences of WEE programming related to GBV.
Women are less likely than men to participate in the labor force across the world. According to the World Bank, roughly 46 percent of women 15 years or older participate in the labor force compared to about 71 percent of men of the same age globally as of 2020. In RBI’s target countries, the percent of women 15 years or older who participate in the labor force is even less: 42 percent in El Salvador and 41 percent in Honduras. Worldwide, women have less access to financial institutions and bank accounts than men: 65 percent of men report having an account at a formal financial institution compared to only 58 percent of women. In addition, WAGE’s barrier assessments in El Salvador and Honduras indicate women who experience intimate partner violence and other forms of GBV in the household or community may be forced to abandon their income-generating activities, divert productive resources (including credit) toward other uses, and/or keep their businesses small and informal, often in insecure settings. COVID-19 has also disproportionately affected economic opportunities and outcomes among women in Latin America and the Caribbean (LAC)—at the onset of the pandemic, women were 44 percent more likely than men to lose their jobs. Given these statistics demonstrating the lack of accessibility to employment and financial opportunities women face, entrepreneurship is vital for socioeconomic growth among women in LAC and globally.
To reduce barriers women face in starting and expanding businesses, WAGE partnered with Kiva, an online loan platform that connects lenders to households that experience poverty across the globe. Through this partnership, RBI and Kiva provided financial support to women entrepreneurs through three local MFI partners: Credicampo and PADECOMSM in El Salvador and ODEF Financiera S.A. (ODEF) in Honduras. The Kiva loan matching platform is an integral component of RBI that enables women entrepreneurs to access micro-loans to improve their livelihoods. Under RBI, WAGE and Kiva established a Donor Advised Fund administered by Kiva and designed to revolve over the course of several years. The fund matched, dollar-for-dollar, the amount individual lenders provided to women entrepreneurs in the two countries through Kiva’s crowdsourcing platform. Furthermore, it leveraged Kiva’s zero percent interest, risk tolerant, and socially connected capital to help finance the delivery of flexible loan products.
To ensure loans on the platform were matched and tailored to women according to their needs, Grameen and Kiva worked with the three MFIs to develop profiles of women entrepreneurs who would be eligible for loan matching. For example, if a woman was looking to expand her restaurant business, her profile may have indicated she needed a loan for additional food products and other supplies. Her profile would have also included her name, location, and the amount she needed for a loan. As such, Kiva was able to effectively match lenders and borrowers according to eligibility and specific criteria that enabled lenders to support individuals and causes they wanted to fund. As mentioned, RBI’s Donor Advised Fund then doubled the individual lender’s loan allowing the borrower to reach their funding goal for their loan amount faster.
Since the MFIs were partners with Kiva prior to RBI, Kiva had already conducted their standard extensive due diligence and readily transferred funds to the corresponding MFI partner. The MFIs then disbursed the loans to their women entrepreneur clients who were matched via Kiva. Kiva’s unique structure provides MFIs with loan capital that is less expensive than standard financial institutions, which allows the MFIs greater latitude for serving harder-to-reach clientele, such as rural women micro-entrepreneurs. Given Kiva’s average repayment rate is 97 percent and repayments were received monthly, the loan matching account was deployed and re-deployed automatically on a revolving basis, which multiplied the impact of contributions over time.
Interestingly, the global average microcredit interest rate is about 35 percent, although it varies between countries. ODEF’s interest rate of 28 percent and PADESCOMSM’s and Credicampo’s interest rates between 15 - 45 percent are well within average global interest rates for MFIs. Small loan sizes are cited as a primary reason why microcredit interest rates are higher than normal bank rates since MFIs must process many tiny transactions instead of a few large loans. Operating costs are another driver of high microcredit interest rates since microfinance is a labor-intensive business. Other factors include public policy, market competition, high rates of inflation in developing countries with unstable economies (leading to high depreciation of cash by the time repayment is completed), the high cost of doing business in rural areas, and high risks associated with serving barrowers who do not have a credit history and are engaged in riskier business ventures than formal bank borrowers. Regardless, and despite challenges posed by COVID-19, high repayment rates under RBI demonstrate women entrepreneurs in El Salvador and Honduras can manage their loans. All three MFIs showed a positive return on investment which is a common indicator of sustainability in microfinance.
RBI does not end at loan matching. While each of RBI and Kiva’s three MFI partners have a strong social mission and commitment to alleviating poverty, their capacity to address GBV, conflict (e.g., gang violence), displacement, and/or other complex barriers/shocks faced by their clients is limited. This is the value add that the WAGE Consortium brings to its local partners. WAGE’s integrated approach leverages each WAGE core partners’ technical expertise such that it enables the Consortium to work at the intersection of GBV, WEE, and WPS. Thus, in addition to providing financial support, Grameen and ABA ROLI support the three local MFI partners through capacity building in the form of a Social Performance Management (SPM) review of MFI policies as they relate to gender, Gender and Power Dynamics (GPD)-plus-conflict trainings for management and frontline staff (with input from Search for Common Ground, or Search), Resilient Life, Resilient Business (RLRB) trainings for staff and clients, and facilitation of linkages with GBV and other social support services to further meet client needs.
Grameen and ABA ROLI supported RBI’s MFI partners to evaluate their internal policies through a Do No Harm (DNH) and Safeguarding lens to ensure gender is front and center in their lending practices and services. Through this process, WAGE found gaps in sexual harassment complaint mechanisms and a lack of safeguarding policies. WAGE also determined MFI partners are unable to adequately monitor unintentional harm such as GBV experienced by their clients as a result of economic activity. WAGE’s GPD-plus-conflict trainings, which are designed by Grameen, incorporate Search’s Common Ground peacebuilding approach to enable participants to understand conflict mitigation. The trainings also support partners to identify unconscious biases and examine the impact of GPD issues at various societal levels including the individual, household, and workplace levels. The goal of the training is to raise awareness about the interplay between gender, power, and conflict and ways this dynamic increases the risk of GBV and other forms of violence. RLRB trainings increase women entrepreneurs’ business planning and budgeting skills for long-term growth, while also increasing their ability to plan for and manage personal safety risks and wellbeing.
Recognizing that no single organization can satisfy every beneficiary or client need, Credicampo, ODEF, and PADECOMSM established linkages with the International Rescue Committee’s CuéntaNos platform, a platform that provides information on GBV and other social services. With the linkage to the CuéntaNos platform, clients become more informed of where to seek information when/if they experience GBV, conflict, displacement, migration, and/or other vulnerable situations. At the same time, ABA ROLI provides GBV technical support so that RBI addresses the unintended consequences of WEE programming related to GBV. As RBI’s MFI partners revise their internal policies to address the gaps noted above, ABA ROLI will work with them to ensure the resulting policies are practical, implementable, and conform to minimum GBV standards, Safeguarding, and DNH principles.
Through its integrated and holistic approach to reducing barriers to WEE in Honduras and El Salvador, RBI is positioning Credicampo, ODEF, and PADECOMSM to better serve their women entrepreneur clients by ensuring their operations are gender sensitive and responsive. Additionally, RBI is providing technical know-how and tools to its local partners in a manner that ensures sustainability by prioritizing training-of-trainers approaches and business resiliency. Lastly, our GPD-plus-conflict trainings are designed to address harmful socio-cultural gender norms that prevent women from fully participating in economic life and decision making at the household and organizational level. This is in keeping with the WAGE Consortium’s transformative approach.