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My Initial Post
Microloans refer to small loans which are extended to needy borrowers. The borrowers do not
have collateral and in most cases, do not have steady employment or any verifiable credit
history. Most of the institutions which offer the microloans intend to alleviate poverty and
support the aspect of entrepreneurship. The people who cannot source large amounts of loans
from other financial institutions depend on the microloans that aid in pushing forward their
businesses (Wang, & Yang, 2016). As a result, such people can feed their families without
failure since they have all they require the small and frequent loans. On the other hand, since the
loans do not require collateral, they have a chance to acquire them quickly and make prompt
payments so that they can have more. As a result, the loans help in reducing cases of poverty
since those with small businesses can acquire them and develop their entrepreneurial activities
for success in the long run.
In raising the effectiveness of microloans, creating awareness would become a significant
way through which people would understand the different ways through which they can benefit
from taking the small loans. In this case, teaching people on the requirements of the microcredit
will ensure that they can feel secure when borrowing. On the other hand, educating them on the
different ways through which they can use the loans to improve their living standards will also
contribute to their successful borrowing (Sullivan, 2007). As a result, when people have the
various ways of utilizing the opportunities, they can have their loans and use them in uplifting
their businesses so that they can also improve their living standards. Therefore, creating
awareness will become one of the ways of ensuring that the people in the society can benefit
from the microcredit and change their lives by reducing the poverty rates.
References
Sullivan, N. P. (2007). You can hear me now: How microloans and cell phones are connecting
the world’s poor to the global economy. San Francisco: Jossey-Bass.
Wang, J. G., & Yang, J. (2016). Financing without bank loans: New alternatives for funding
SMEs in China.
1. Teacher Comment
Khem,
Thanks for adding these great sources to our discussion. In what ways do they connect with the
assigned readings (Girón [2015] or Berlage and Jasrotia [2015]) and the focus on women’s roles
in microfinance?
2. Colleague Post
Microfinance was initially a social experiment that blossomed into an initiative to help folks rise
out of poverty. It is basically a loan with reduced qualification requirements intended to be used
constructively. The objective of this type of financing was to stimulate economic activity by
improving household welfare, bolstering entrepreneurship, reducing poverty, and through
women empowerment. This financing method could be effectively utilized to advocate
expansion if the borrowed funds are rerouted back into the community.
Specifically, I would make it a requirement that an applicant provide a plan of action or business
plan along with their application. A formal interview process would also help probe for
insincerity of an applicant. Another requirement could be that a borrower must attend a financial
responsibility briefing prior to borrowing. Given that microloans are intended to turn a profit for
the issuers who are in return influenced by investors I would make sure that lenders are firmly
regulated.
Reference:
BERLAGE, L., & JASROTIA, N. V. (2015). Microcredit: from hope to skepticism to modest
hope. Enterprise Development & Microfinance, 26(1), 63-74. doi:10.3362/17551986.2015.007
3. Colleague Post
Microloans are loans given out by non-traditional lending institutions that are intended to give
the poorest members of the community the ability to start their own business. They typically
charge a much higher interest rate than traditional institutions, and have been documented using
unscrupulous means to ensure repayment, such as pressure from representatives going to the
business and demanding repayment (Berlage, Jasrotia, 2015). In order for microloans to be an
effective tool in growing an economy they must be set up in a way that makes payment doable
for both the borrower and the lender, so there is no need for constant revenue streams to the
lender in order to keep up with bad debt. One way to do this is the promise of a percentage of
profits, on a sliding scale, for a determined amount of time in order to stimulate growth and also
pay back the funds so they may be loaned again to another business.
The best strategy would be to wrap these microloans under the umbrella of a reputable
banking institution with help from the government. Having a stream of grants and low interest
loans from the government would help stimulate more small business growth in the country by
offering loans with a higher, but manageable, interest rate to those that otherwise would not be
eligible. The creation of jobs would help provide additional revenue to the government and over
time could increase the funding available to small businesses. Properly regulated microloans can
also help established small businesses expand and create more jobs.
BERLAGE, L., & JASROTIA, N. V. (2015). Microcredit: from hope to skepticism to modest
hope. Enterprise Development & Micro-finance, 26(1), 63-74. doi:10.3362/17551986.2015.007
JOURNAL OF ECONOMIC ISSUES
Vol. XLIX No. 2 June 2015
DOI 10.1080/00213624.2015.1042738
Women and Financialization:
Microcredit, Institutional Investors, and MFIs
Alicia Girón
Abstract: My aim in this paper is to show the way in which microfinance acquires
the face of women. While micro-finance institutions (MFIs) act under the flag of
“serving the common good,” there are still the interests of institutional investors
behind them, who are looking to profit through international financial circuits. On
one hand, microfinance is part of financial innovation in the global financial
circuits. On the other hand, women’s bancarization inserts them into the labor
market, hence into the financial circuits. MFIs become part of the shadow financial
system. When debating microcredit’s profitability from a gender perspective, I note
both the financial effectiveness of microcredits and the role of women as highly
profitable economic agents. Is there a relation between financialization and
microcredit? Is microcredit an achievement that will improve the economic,
political, and social environment for women? Why is it that women’s bancarization
has been a priority of international financial organizations? Microcredit with a
woman’s face confirms the suggested hypotheses. Their empowerment through
microcredit is a new way for financial investors to obtain higher profits through
MFIs. The highest interest rates that MFIs charges are an expression of
financialization by institutional investors.
Keywords: financialization, institutional investors, microfinance institutions,
women
JEL Classification Codes: D0, G15, G20, J16, O12
As part of the financialization process, the shadow financial system has emerged
around the world in different ways. It is not only part of the official dialogue within
the macroeconomic field, but also within the microcredit sphere. Micro-finance
Alicia Girón is the 2015 James Street Scholar. She is a professor and researcher in the Economic Research Institute at
the National Autonomous University of Mexico (UNAM). This paper is part of the project “Global and Regional
Financial Competition: Post-Crisis Financing Models and Employment, Gender and Migration: Between Austerity and
Uncertainty from the Dirección General de Asuntos de Personal Académico (DGAPA)” of UNAM. She thanks Miguel
Ángel Jiménez, Libertad Figueroa (UNAM), and Andrea Reyes (CONACYT’s scholarship) for their support.
373
©2015, Journal of Economic Issues / Association for Evolutionary Economics
374
Alicia Girón
institutions (MFIs) are part of the financial process, especially when it comes to
addressing the poor in developing countries. Most microcredits are given to women
who need to improve their income, and they have been portrayed by the dominant
ideology as a mechanism for women’s empowerment.1 Microcredit with a woman’s
face is one of the most important metamorphoses that has come from the structural
changes in financial and labor-market circuits since the late 1970s. Microcredit not
only empowers women, but also leads them to becoming economically profitable
subjects in microfinance services. At the same time, the profit obtained by MFIs is
part of the financialization in international financial circuits. Many MFIs depend on,
or are part of, big banks.
Small Loans with a Woman’s Face
When focusing on the analysis of microcredit, the high profitability of small loans,
granted by MFIs at an international level, becomes noticeable (Rosenberg et al. 2013).
Reducing poverty and improving the conditions of families are two elements of the
normative discourse that highlights the role of women as economic agents through
the access to funding granted by MFIs (Bateman and Ha-Jong 2012). Therefore,
microcredit is the ideal way to obtain funding for starting small businesses. It is ideal
to such an extent that even in the UN Millennium Development Goals the concepts
of empowerment, women entrepreneurs, and microcredit are used to refer to women
as economic agents. Hence, there is a close relation between empowerment, women
entrepreneurs, and microcredit within the economic sphere of macro-economy,
despite the fact that a great amount of microcredit is not created to generate new
businesses, but to power daily consumption.
There has been a transition, during the last four decades, from regulated to
deregulated financial systems. This change has brought forth the integration of
financial institutions into global circuits. The rapacious quest for profit and stock
price appreciation indicative of “money manager capitalism” (Minsky [1986] 2008)
has drawn money-center banks, giant pension funds, and other institutions into the
microcredit sphere. As the relative importance of state and development banks has
waned, microcredit operations are increasingly subject to the logic and imperatives of
rentier capitalism (Keynes [1936] 1964).
In most Latin American and Asian countries, institutional financial
intermediaries have obtained great profits from MFIs (Girón 2012a). Through
international financial markets, MFIs channeled liquidity toward funding small
subsidiary loans from banking corporations that are classified as “too big to fail, too
big to rescue.” These corporations have been favored by financial regulation from the
state and from international financial agencies, such as the International Monetary
1
Empowerment, from a gender perspective, consists of transforming women into economic agents —
capable beings with “freedom to choose” not only how to use credit, but also to engage in productive
projects as entrepreneurs in administrative, social, and political decision-making position.
Women and Financialization
375
Fund (IMF), the World Bank, the Bank for International Settlements (BIS 2013),2
and the central banks. According to the latter, the empowerment of women as
entrepreneurs through microcredit is untenable. In a world of “money manager
capitalism,”3 in which Minsky (Wray 2011) discerned the greed of financial
institutions and in which financialization has become the norm, it can hardly be said
that microcredit is the path to empowering women who live in an austere
environment.
Women are candidates for microcredit since it is the simplest way to include
them in both labor markets and financial circuits, by making use of the important
commitment they have to their families and their jobs. Therefore, the need for
women to be income providers to their families brings about the transformation of
societies by breaking traditional gender norms not only in managing money, but also
in combatting gender discrimination both within the family and the workplace.
NGOs, having recently emerged as a shadow of the state, offer credit and
employment, as well as shape the production system in many societies (Karim 2011).
The development of credit systems by NGOs started with the weakening of the state
in the spheres of production and circulation. It was during the 1980s and 1990s that
this model became surprisingly preeminent and influential when it came to making
decisions related to economic policy. Under this pressure, patriarchal society began to
break and the prerogative of development acquired great importance. In the 1960s,
development was transformed into an organic process that aimed to raise the quality
of life in a developing project to combat poverty on a global level. Microcredit, as
referred to in the official discourse, assists this new model in eradicating poverty.
Therefore, MFI regulation demands a new legal structure aimed at regulating credit
relations between creditors and debtors, domestically as well as internationally.
Profit Margins and Microcredit Profitability
Using the World Bank’s data, I analyzed the profitability levels of fifteen MFIs with a
large margin of profit at a global level by regions4 during 2012. I took into account
those MFIs that, as borrowers, are located above 60 percent since, during that year,
they reflect a profit margin above 65 percent (Table 1). However, there is the case of
MEC le Sine with a profit margin of 209 percent. On average, the profit margin of
the main, most profitable MFIs is 75 percent.
2
BIS is located in Basilea, Switzerland.
“Money manager capitalism” is defined as the changes that occur in the banking structure and the
return to instability due to a characterization of capitalism based on securitization, globalization,
financialization, deregulation, and liberalization (Tymoigne and Wray 2014, 72).
4
The regions taken into account for this analysis are Latin America and the Caribbean, Southern
Asia, Eastern Asia and the Pacific, Central Asia and Eastern Europe.
3
Alicia Girón
376
Table 1. Main MFIs by Profit Margin, 2012
Name
Country
MEC le Sine
Hope Russia
MF Nadejda
Inam
Alcaravan
CCC
Rishenglong
Ochir-Undraa OMZ
Fundación Paraguaya
TEDC
JSJRMCC
Amalkom
UCEC-G
BTV
Guarantee Agency
of Nizhniy Novgorod
Senegal
Russia
Russia
Azerbaijan
Colombia
Ecuador
China
Mongolia
Paraguay
Iraq
China
Iraq
Chad
Vietnam
Women
borrowers %
Russia
87
Assets
(thousands of $)
547,773
449,951
449,951
13,415
7,573,055
3,319,228
22,994,732
4,872,000
30,510,006
6,589,490
95,782,744
7,606,743
3,010,413
311,757
ROA
%
23
11
11
6.0
26
10
8.0
6.0
20
16
8
41
7.0
12
ROE
%
101
11
11
6.0
43
13
11
9.0
76
16
12
48
19
12
Profit
margin %
209
88
88
87
86
84
78
72
67
67
67
67
66
66
20
17,383,426
5.0
6.0
65
79
79
33
61
42
15
41
86
Source: Mixmarket (2012).
Notes: ROA: Return on Assets (Net Operating Income, less Taxes)/Assets, average; ROE: Return on Capital (Net
Operating Income, less Taxes)/Capital; Profit Margin: Net Operating Income/ Financial Revenue.
Taking into account the available data, I made a regional analysis according to
the World Bank’s classification.
Latin America and the Caribbean
Latin America and the Caribbean involve seventeen countries,5 of which Mexico
had the highest number of MFIs in this area with a total of sixty in 2012. For Mexico,
this number is equivalent to 16 percent of the total MFIs established within the
region, followed by Peru and Ecuador with 15 and 12 percent of the total, respectively
(Figure 1). The distribution of assets within the region differs. Peru had the highest
amount of assets with 32 percent of the total, followed by Colombia and Mexico with
21 and 12 percent, respectively (Figure 2).
5
For this region and because of the existent MFIs, Mixmarket only takes into account the following
countries: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala,
Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Dominican Republic,
Santa Lucia, Suriname and Trinity, and Tobago.
Women and Financialization
377
Figure 1. MFIs’ Distribution by Country, Latin America and the Caribbean, 2012
Haiti 1%
El Salvador 3%
Paraguay 2%
Costa Rica 3%
Argentina 3%
Panama 1%
Others 3%
Dominican
Republic 4%
Guatemala 5%
Mexico 16%
Bolivia 5%
Nicaragua 6%
Peru 15%
Honduras 6%
Brazil 7%
Ecuador 12%
Colombia
7%
Source: Mixmarket (2012).
Figure 2. MFIs’ Asset Concentration by Country, Latin America and the
Caribbean, 2012
Dominican El Salvador 1%
Republic 2%
Others
Paraguay 4%
6%
Chile 4%
Peru 32%
Ecuador 7%
Bolivia 11%
Mexico 12%
Source: Mixmarket (2012).
Colombia 21%
Alicia Girón
378
Of the fifteen MFIs, whose profit margin in Latin America and the Caribbean
was highest, seven granted more than 50 percent of their credit to women and showed
a profit margin above 50 percent (Table 2). Three of the fifteen MFIs are located in
Colombia, alongside the MFI with the largest profit margin — Alcaravan (this MFI
granted six out of every ten loans to women). Thirteen out of the fifteen main MFIs
granted over 60 percent of their credit to women. The case of FIACG, in Guatemala,
stands out since 100 percent of its loans were granted to women, generating a profit
margin of 34 percent, a ROA of 13 percent, and a return on equity (ROE) of 14
percent. On average, the indicator for the fifteen MFIs is 17 percent ROA and 34
percent ROE. The MFIs with the highest percentage of credit granted to women were
Compartamos Banco and Invirtiendo, both Mexican, with 94 and 93 percent,
respectively.
Table 2. Main MFIs in Latin America and the Caribbean, 2012
Name
Alcaravan
CCC
Fundación Paraguaya
FUNDEVI
LICU
Invirtiendo
FOVIDA
APACOOP
Fundación Mundo Mujer
FUNDESCAT
IPED Guyana
Financia Credit
MCN
CREDIOESTE
MUDE
Name
ACCESS
Alcaravan
Fundación Paraguaya
Invirtiendo
Fundación Mundo Mujer
CEAPE MA
CREDIOESTE
MCN
ASEI
Compartamos Banco
FIACG
Fundación Adelante
Profit Margin
Women
Country
borrowers %
Colombia
61
Ecuador
42
Paraguay
86
Honduras
46
Belize
Mexico
93
Peru
Costa Rica
26
Colombia
64
Colombia
56
Guyana
34
Panamá
2
Haiti
64
Brazil
24
Guatemala
91
ROA
Women
Country
borrowers %
Jamaica
57
Colombia
61
Paraguay
86
Mexico
93
Colombia
64
Brazil
67
Brazil
24
Haiti
64
El Salvador
83
Mexico
94
Guatemala
100
Honduras
99
Assets
(thousands of $)
7,573,055
3,319,228
30,510,006
100,802,289
19,835,918
32,012,269
2,507,512
4,162,935
480,471,143
3,632,513
13,959,317
3,571,088
24,121,586
2,830,603
1,981,227
ROA
%
26
10
20
6.0
6.0
19
11
7.0
17
9.0
8.0
7.0
17
17
9.0
Profit
margin %
86
84
67
59
55
52
50
46
45
43
42
41
40
38
37
Assets
(thousands of $)
9,527,859
7,573,055
30,510,006
32,012,269
480,471,143
22,912,912
2,830,603
24,121,586
3,617,474
1,333,796,296
3,495,906
1,460,022
ROA
%
29
26
20
19
17
17
17
17
15
13
13
13
Profit
margin %
36
86
67
52
45
33
38
40
33
31
34
22
Women and Financialization
379
Table 2 continued
FIACG
Fundación Adelante
ECLOF – DOM
Avanzar
Financiera CIA
Guatemala
Honduras
Dominican R.
Argentina
Mexico
Name
Country
FUNDESER
Fundación Paraguaya
ECLOF – DOM
ACCESS
Alcaravan
Apoyo Económico
Financiera Edyficar
Santander Microcrédito
CRAC Los Andes
MCN
Fundación Mundo Mujer
Fundación Alternativa
Compartamos Banco
Invirtiendo
CREDIOESTE
Nicaragua
Paraguay
Dominican R.
Jamaica
Colombia
Mexico
Peru
Brazil
Peru
Haiti
Colombia
Ecuador
Mexico
Mexico
Brazil
100
99
80
65
82
ROE
Women
borrowers %
50
86
80
57
61
56
69
64
64
55
94
93
24
3,495,906
1,460,022
6,578,954
352,080
2,759,949
13
13
13
12
12
34
22
30
15
25
Assets
(thousands of $)
20,267,041
30,510,006
6,578,954
9,527,859
7,573,055
103,648,367
1,064,706,594
11,398,537
50,960,794
24,121,586
480,471,143
18,542,773
1,333,796,296
32,012,269
2,830,603
ROE
%
115
76
71
44
43
39
38
36
35
34
33
32
31
30
30
Profit
margin %
86
84
67
59
55
52
20
46
45
43
42
41
40
38
37
Source: Mixmarket (2012).
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