Avida's Story

Access to credit is not a new concept in the urban slums in India. Women borrow money from 'money lenders' who usually charge a rate of 10-15% per month or 120% annually. These exorbitant rates not only make repayment next to impossible but creates an environment where families become more and more entrenched in debt as they borrow money to pay back old loans. Money-lenders exploit women unable to make timely payments through the use of sexual and physical violence that sometimes even extends to the family.

From an economic point of view, NGOs are creating a more efficient money-lending market. Critics of microfinance point out the high interest rates - averaging about 24% per year. However, comparing 24% to the 120% the money lenders charge, the rate is much more reasonable. And that's where the comparisons should end. True, the 24% rate would never fly in the States, and in the same vein, no one would take out a loan for just $50. What seems like an insignificant amount of money to us can really make a difference in the ability of poor people around the globe to create and sustain livelihoods.

For example, listen to the story of Avida. Married at 9 years old she had her first child at 14. Only educated through the second grade, when her husband died of a heart attack she was left along to care for her four children. Through a friend, Avida learned of microfinance and joined a Self Help Group (SHG) to gain access to savings and credit. Ten years later, Avida has taken out three separate loans to expand her business of selling bangles and tailoring saris. So far she has borrowed and repaid 50,000 Rupees (about $1,100). She is currently repaying her third loan and then plans to take another to build a second floor on her house to rent. This will provide her with a stable source of income in addition to her other businesses.

Avida attributes her success as a business woman to the network she's built through the SHG group and her perseverance and patience. She takes great pride in the quality of her work and most of her business referrals come through word of mouth. At 34 Avida already has grandsons, but she hopes to educate her two children still living at home. One day she dreams of having a shop of her very own.

After spending an afternoon in Avida's 1-room home in the Pune slums listening to her story, I was struck by her confidence and the great strength she gains from the other members of her SHG. Joining the group has given her access to credit and savings, but along the way she and the other women have created a support structure for each other. Together they have taken on sanitation issues with the municipal government, successfully reported a man of domestic violence, and organized a day of clean up to impact the overall health of the community. Women came together for a tangible thing: money, and through the process became leaders and in their community.

As I continue to write this blog and delve into the specifics of how microfinance works please keep one thing in your mind:

Microfinance is a tool used for the end goal of empowering women.

Yes, microfinance is profitable.
Yes, microfinance institutions can be self-sustaining.
...but microfinance practiced for the sake of making profits is a misguided approach.

In the next few entries I will describe a few methods of microfinance I have witnessed and how it contributes to women's empowerment.

Sorry, no pictures today! Having some technology issues... Hope all is well!