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June 27, 2023

Investing in Women is a Smart Choice: Building Capacity to Expand Women’s Role in Micro-finance in El Salvador and Honduras

By Jackie Aitken

​Microfinance programming provides low-income individuals with access to microcredit and other financial services including educational opportunities. While commercial banks have traditionally focused on providing loans to men and formal businesses, it is equally important to support women entrepreneurs who participate in the informal economy. Data increasingly demonstrates the positive impact of expanding access to microfinance opportunities for women so they can better support their families and communities, particularly during times of crisis. For example, women clients often show higher repayment rates and contribute larger portions of their income to household consumption. Investing in women through microfinance, in turn, contributes to gender equality and sustainable development.
According to projections published in 2022 by the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women), United Nations Development Programme, and Pardee Center for International Futures, an estimated 388 million women and girls globally (compared to 372 million men and boys) would be living in extreme poverty by 2022. Although these figures show women make up about 51 percent of the world’s extreme poor, there are several other important gender dimensions of poverty to consider. Poverty is often measured at the household rather than the individual level, yet women, children, elders, and individuals with disabilities frequently experience greater levels of poverty than their male counterparts living within the same household. Further, 83.7 percent of the world’s extreme poor women and girls are projected to live in either Sub-Saharan Africa (62.8 percent) or Central and Southern Asia (20.9 precent). Using national poverty line estimates, this forecast also found 30.4 percent of women and girls in Latin American and the Caribbean live in poverty.
Further complicating the situation are risks women face as they access financial services and the power imbalances that may result from a microfinance institution (MFI) lending money to a poor woman entrepreneur. Women entrepreneurs may be at risk of defaulting on a loan for a variety of reasons, including if her spouse assumes control of and mismanages the funds or coerces her into taking a loan on his behalf, if she allows her clients to purchase her goods on credit, if she lacks the knowledge and skills to effectively manage the loan, if her business experiences shocks/stressors such as natural disasters or conflicts, etc. Women entrepreneurs are also at risk of the unintended consequences of women’s economic empowerment (WEE) programming related to gender-based violence (GBV), such as increased rates of intimate partner violence due to shifting gender and power dynamics within a household as a woman gains more financial autonomy from her male spouse or partner.
To address the gender poverty gap, the Reducing Barriers to Women’s Economic Empowerment in El Salvador and Honduras Initiative (RBI) under the Women and Girls Empowered (WAGE) global consortium has supported women entrepreneurs in Central America since 2018 with funding from the U.S. Department of State, Secretary’s Office of Women’s Issues (S/GWI). RBI partners with three local MFIs—ODEF Financiera (ODEF) in Honduras and Credicampo and the Fund for the Development of the Communities of Morazán and San Miguel (PADECOMSM) in El Salvador—to create an enabling environment for women entrepreneurs by addressing gender and social norms, exogenous shocks and stresses, and other barriers that inhibit women’s abilities to start up, finance, and/or grow their businesses.
To accomplish this, RBI funded 10,578 women entrepreneurs through the Kiva loan matching fund, which unlocked $5,402,700 total in loans for these women between 2019 – 2021. RBI also offers a social performance management (SPM)-centered technical assistance package to its MFI partners to ensure their organizational policies, lending practices, and client support are in line with Do No Harm, safeguarding, gender, and GBV best practices. Part of this package includes supporting the MFIs to provide training and educational opportunities on gender equality to their staff and on effective business and life management skills coupled with GBV basic concepts to their clients. Moreover, RBI partnered with the International Rescue Committee (IRC) to share information about IRC’s virtual CuéntaNos platform with MFI staff and clients, through which women entrepreneurs can access information on GBV, health, education, legal assistance, citizen protection, shelter, employment, and other social services.
As RBI nears its end date in late June 2023, WAGE core partners, the Grameen Foundation (Grameen) and the American Bar Association Rule of Law Initiative (ABA ROLI), held a final multi-stakeholder dialogue (MSD) in Guatemala in March 2023 on the margins of the Central American and Caribbean Microfinance Conference led by Redcamif. Representatives from ODEF, Credicampo, and PADECOMSM, as well as from Kiva and IRC’s CuéntaNos team, participated in the learning session to discuss RBI lessons learned, impact, and future opportunities. RBI partners shared new insights about implementation and positive externalities during the MSD, and Grameen and ABA ROLI had the opportunity to hear directly from partners about challenges and successes under this WAGE initiative.

Numbers Outcomes

10,578 women entrepreneurs funded

$5,402,700 in unlocked in loans, 

Increased percentage of women clients in lenders' overall portfolios

Increased pride from women beneficiaries in accessing loans

Regarding the loan capital from Kiva, RBI partners felt it was useful to have this online loan platform that served as an intermediary channel under RBI to connect lenders to households experiencing poverty. The line of credit proved valuable for vulnerable women, and this emphasis helped them increase the percentage of women in their overall portfolio. They also shared how they noticed the women were proud to access the loans and, in so doing, tap into their own power. The representative from Kiva, hearing many initiative outcomes for the first time, shared his surprise and the need to now employ additional marketing strategies to communicate these successes to investors and other stakeholders. Under WAGE, Kiva, Grameen, ABA ROLI, and the MFI partners planned campaigns around special dates (e.g., World Hunger and Gender Equality causes) to capture attention, improve communication, and share information on financial opportunities.

One of the methods WAGE utilizes to shift harmful gender norms within its integrated WEE/GBV programming that focus on increasing financial services to women includes Grameen’s Gender and Power Dynamics (GPD) + Conflict  workshop.  The workshop is deployed at an organizational level with partner MFI management and frontline staff members. ODEF was so impressed with the shifts in behaviors, attitudes, and perceptions among its leadership and mid-management staff that it decided to continue to cascade the workshop not only throughout the organization, but among some of their clients as well. MFI partners agreed that gender workshops are an effective approach to address resistance to change among their staff and improve relationships among colleagues through increased knowledge and understanding. Partners highlighted the need for additional human talent workshops for leadership, especially to support women so they feel empowered to take on positions of power and influence within their workspace.

All the MFI partners discussed several other approaches they took to increase gender equality within their institutions. Hiring more women as credit officers is one primary example, citing women are more empathetic and do as well as men in these roles. Also, all three organizations increased women’s roles in leadership and board levels. For example, ODEF reported they have added another woman board member (with women now making up half the board), and approximately 35 percent of their staff are now women, compared to 29 percent prior to the start of RBI. While recruitment and onboarding of new staff is a significant undertaking, these are important achievements to date. In addition, women can drive motorcycles in rural areas, and it is important to generate more spaces where women can work together with men. Credicampo established a social development unit within its operations to help identify and target potential clients who lack specific knowledge and experience so they can provide educational opportunities to these individuals and make them more eligible for loans. There was a consensus among the MFI partners about importance of policy-level change around gender and creating more training opportunities for women clients. As one participant noted, “If you put on your gender glasses, you can’t remove them.” While the development of policies is still in draft form, progress has been made by all three to articulate how the organizations will prioritize women’s needs (both staff and among clients) and how they will safeguard them.

The discussion around implementation of the RLRB curriculum designed for MFI clients revealed both the success of the modules and how each partner adapted the training to the needs of their clients. For example, the team from PADECOMSM shared how they switched up the order of the training modules to review resilient business principles before going into resilient life modules which included content on GBV. Credicampo and ODEF similarly started with the business and financial literacy modules prior to including content on what constitutes GBV. Through this approach, the partners mentioned there was little resistance to learning about GBV among clients. Toward the end of training replication, MFIs began to choose specific modules to complete since the full RLRB curriculum was often too long. Credit officers would help select which modules to focus on depending on their clients’ needs and interests.

Internet connectivity is a challenge in many of the communities our MFI partners service. To address the challenge of internet connectivity in both rural and urban areas (even with smartphones), credit officers used mobile tablets on which they could download interactive videos ahead of replicating the RLRB training to clients. PADECOMSM, along with the other partners, pointed out that clients really appreciated the videos included in the modules, especially since literacy is a barrier for many participants. There is a difference in education levels among clients across geographic locations, so credit officers offered varying levels of support depending on needs. Beyond these challenges, the MFIs had to address the fact that women entrepreneurs are often busy managing their work and the needs of their families—so finding the time for trainings could be difficult. Some of the MFI partners lowered the interest rates of their clients who attended the training to incentivize their participation and/or worked with local community leaders to promote the importance and usefulness of RLRB. Partners also created WhatsApp groups to facilitate communication, connection, and support between RLRB participants themselves. As some RLRB sessions focus on resilient lives, partners noted women felt the MFIs cared about their personal lives and wellbeing beyond the monetary value of their role as clients to the institutions.

An innovation of the RBI initiative is its linkage to IRC’s CuéntaNos platform, which provides a range of GBV survivor support services. Grameen and the MFI partners integrated information about the platform into the RLRB curriculum, and conversely, IRC integrated information about RBI’s MFI partner financial services into CuéntaNos itself. A representative from ODEF mentioned in Honduras, if a woman client experiences GBV, credit officers do not know how to react/handle the situation, especially in a survivor-centered manner. By introducing CuéntaNos to their clients, credit officers can link women to the platform for emotional support. Women clients said they want to bring information about the site home and share it with family and other community members. RBI’s successful approach to integrate WEE and GBV through this linkage with CuéntaNos serves as a two-way street to increase awareness on business opportunities for women among IRC’s beneficiaries and to expand support to GBV and other social services among MFI clients. Importantly, the linkage created a safeguard for MFIs to react to any potential unintended consequences of WEE programming related to GBV while ensuring client confidentiality.

A unique aspect of WAGE programming is its integrated approach. We have learned over six years of implementation globally that working effectively at the intersection of WEE and GBV is challenging, and change can be slow because this work goes to the heart of value systems that assign power and privilege according to gender and marginalize and disempower women. All partners agreed such integration needs to be viewed as an investment, especially since there is a large time and personnel commitment involved. The financial health of MFIs is often linked to the well-being of their clients, so it is paramount to design products that meet clients’ needs. Conversations with clients make them more loyal to the institutions, which creates lasting business relationships. One MFI representative stated, “Customers want to be asked how they’re doing”, demonstrating the value of understanding the social narratives of women’s lives. IRC noted this is essential if clients are experiencing the cycle of violence as an unintended consequence of their economic empowerment. A representative from ODEF said, “We think about what we do and try to do it better each day.” As noted previously, investing in gender equality and integration is a long-term process that benefits both MFIs and women entrepreneurs over time.

Representatives from Credicampo also brought up the fact that since WAGE did not establish a baseline for RBI, it is difficult to measure whether there were significant changes among clients over the past few years. For example, are the clients now more loyal? Did the clients themselves see progress? How was quality of life improved by the integration of these services? These are important questions for consideration under similar projects. Partners also reported they are keeping the training modules (both RLRB and GPD + Conflict) on a permanent basis. Now that they have these tools, they will be working to scale them to reach more current and future clients. The linkages established with CuéntaNos through RBI are also continuing beyond RBI’s end date, and IRC stressed the potential for additional collaboration around psychosocial support (e.g., while it is not the objective of credit officers to become psychologists, they want and need the tools to support women customers who may be experiencing GBV through a survivor-centered approach).

One of the major challenges all MFI partners cited is sustainability and the difficulty of growing with limited resources. This is particularly true in post-conflict settings, as Credicampo mentioned many organizations have not been sustainable following the armed conflict and peace agreement in El Salvador. The partners had a high-level discussion on potential ways to improve sustainability, which include further tailoring products to client needs to improve relationships with clientele, expanding support beyond loans, engaging youth, expanding access and increasing training/educational opportunities, developing community savings groups and generating a culture of savings, engaging and sensitizing males around positive masculinities, establishing public-private partnerships and alliances, connecting with diaspora, making use of new projects for continuity, and advancing development initiatives to improve the entire financial ecosystem. Importantly, the MFIs also reemphasized the valuable and practical nature of investing in women since risk of return on investment is shown to be low among this group.

One MFI representative remarked, “Participating in WAGE has been enriching as an institution. We can be empathetic and open our minds to new challenges and opportunities.” This sentiment demonstrates the importance of initiatives like RBI for increasing gender equality within financial institutions and creating a more enabling environment for women entrepreneurs in Central America. 

Published on June 28, 2023.

    *Disclaimer: The views and opinions expressed in this blog post do not necessarily reflect the views of the United States Government. 
    Women and Girls Empowered (WAGE) is a global consortium to advance the status of women and girls, led by the American Bar Association Rule of Law Initiative (ABA ROLI) in close partnership with the Center for International Private Enterprise, Grameen Foundation, and Search for Common Ground. WAGE works to strengthen the capacity of private sector organizations (PSOs) and civil society organizations (CSOs) in target countries to improve the prevention of and response to gender-based violence (GBV); advance the women, peace, and security (WPS) agenda; and support women’s economic empowerment (WEE). In this context, WAGE provides direct assistance to women and girls, including information, resources, and services they need to succeed as active and equal participants in the global economy. WAGE also engages in collaborative research and learning to build a body of evidence on relevant promising practices in these thematic areas. To account for the deeply interconnected nature of women’s and girls’ experiences, WAGE’s initiatives employ approaches that are highly collaborative, integrated, and inclusive. WAGE is funded by the U.S. Department of State Secretary’s Office of Global Women’s Issues.

    The materials contained herein represent the opinions of the authors and editors and should not be construed to be those of either the American Bar Association unless adopted pursuant to the bylaws of the Association. Nothing contained herein is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. These materials and any forms and agreements herein are intended for educational and informational purposes only.