How access to microfinance and education through technology can alleviate poverty in third world countries.

Author:Gow, Kathryn M.


The World Bank has argued that the best way to help people climb out of poverty is to give them an education. Professor Yunus of the Grameen Bank (GB) has demonstrated that poverty alleviation can also occur through microfinance--the provision of small loans of money to very poor women who wish to commence a small business. After twenty-three years of working in Bangladesh which is still one of the poorest countries in the world, the GB has already taken the mobile phone to rural villagers who pay to use the cell phone to call relatives overseas; and Grameen Net is planning to bring the Internet to rural towns. The author explores whether a combination of microfinance (GB Replicas) and access to education through communications technology could speed up the empowerment process in third world towns and rural areas at a time when globalization and the lack of access to technology is making many third world countries poorer.


According to the World Bank Vice-President for Environmentally Sustainable Development, globalization is having some negative outcomes for all societies (see De Borchgrave, 1996). He believes that the way to reach the poor is through microfinance, microenterprises and self-employment. Not everyone is ecstatic about this route however. Ehlers and Main (1998) speak about the false promise of microenterprise in the USA and "The Economist" (1998) points to the possible dangers of the Community Development Financial Institutions (CDFI) funded programs which have not been tested by recession. However, Rahman and Wahid (1992), in a review of the Grameen Bank, in Bangladesh believe that "because of the flow of cash to the poor, the vulnerability of the rural poor has been greatly reduced" (p. 314).

McGuire and Conroy (1998) have observed that with the exception of Pakistan, both donors and governments have given substantial funds to support the development of microfinance in Asia. In 1997, just before economic tragedy struck Indonesia, Robinson reported the Bank Rakyat Indonesia (BRI) in Indonesia had proven that the demand for microfinance could be met sustainably on a larger scale.

Certainly the Asian recession has increased the number of poor between 1996 and 1999, by at least 3 million in Thailand alone. The World Bank's report on "Attacking Poverty" (World Development Report, 2000) indicates that this increase will be sustained in part even when the economy improves, because of the loss of assets including land and savings (Duang Prateep Foundation Monthly News, December, 2000: p. 4). CASHPOR (Credit and Savings for the Hard-Core Poor in Asia-Pacific), in their newsletter "Credit for the Poor" reported on the situation of microfinance institutions (MFI) in Indonesia following the Asian economic downturn and were pleased to write that although there were serious consequences for the poor, whose numbers grew enormously over the first year after the crash, those who were in Grameen Bank Replicas appeared to have weathered the crisis better than those who had not been part of such a microfinance scheme. McGuire and Conroy (1998) report similarly on the Indonesian institutions they followed up, although earlier on, there appeared to have been a reduction in outreach of microfmance programs within the rural banks

Particularly over the past two decades, the concepts of Microcredit and Microfinance schemes, have been introduced to developing countries to assist the very poor. Often there is some confusion about the terms microcredit and microfinance. Microcredit is a system of providing credit to poor people who cannot normally access it, while microfinance includes both a savings and a credit component. While many microfmance projects commence in urban areas (Jackelen & Rhyne, 1991), this article is concerned generally with rural areas. In most countries, access to banking services is restricted in rural areas, although in the more affluent countries, Internet Banking is changing that now. There is no doubt that the formal financial sectors have not been able to meet the demands for financial services in poor rural households. Vietnam is one country in point (see Johnson, 1998).

For many decades, many different creative credit and savings schemes (Conroy, Taylor & Thapa, 1995), cooperatives and self help schemes (Khandker, 1998), and community banks, for example the Grameen Bank (GB) (Yunus, 1994; Gibbons & Kasim, 1990) and the Centre for Agriculture and Rural Development (CARD) Inc. Bank (Aristotle, 1999; Torres, 1999) have been developed and trialed throughout the developing countries (see Khandker, 1995) and more recently in developed nations (see Counts, 1996). The reason for this is that the very poor have been found to be a better credit risk than the less poor and have little access to formal credit because they lack collateral (Foundation for Development Corporation [FDC], 1992; Grameen Dialogue Newsletter, 1999). The majority of the participants in these schemes have been poor women (The World Bank Group, 1999).

Women Borrowers as Credit Recipients

The trend in the "feminization of poverty" has been highlighted by Buvinic (1997) and observers across the globe attribute this to a complexity of factors including market reforms, divorce, migration, trade liberalization, privatization, currency devaluation, cutbacks in social services and tax reforms, structural adjustment and global restructuring, and the higher unemployment of women after economic reforms (see Angeles, 2000).

Pearson (2000) argues that "women have become the ideal 'flexible' worker of the new global economy' (p. 6) and indicates that it is because they are prepared to be flexible to comply with family duties, that they are over-represented in the lower-paid occupations, with little security, or bargaining power. Indeed Beresford (1994) maintains that a less educated population overall has "fewer opportunities for improving their economic circumstances and is more likely to be influenced by traditional practices, including practices which discriminate against women, in their daily lives" (p. 30). Beresford believes that moving Vietnamese women beyond their traditional domestic roles depends on educational attainment. Note that it is not that they be "educated" in terms of being persuaded or indoctrinated (as in some development and government programs), but rather that they attain an educated status.

There is some indication that perhaps access to credit has drawn women out of their homes, making them more self confident and empowered, and this in turn means that they use family planning more successfully (see Schuler & Hashemi, 1995). Indeed the first request for training (in addition to the formal training in microfinance) from the Ward Women's Union in the Ba Ria Microfinance scheme (Australian Veterans Vietnam Reconstruction Group [AVVRG] Newsletter, 2000) was for family planning for the communes. The majority of women in these MFI schemes have a positive attitude towards family planning (see for example, Todd, 1996).

Overall, the findings of the impact of credit provisions on women's empowerment in Asia are generally positive (see Sebstad & Chen, 1996). The desired outcomes include economic security, ability to make their own purchases, political and legal awareness, public participation, more control over decision-making, more bargaining power, and increased self confidence. Bernasek and Stanfield (1997) advocate that the peer-mentoring process in GB methodologies facilitate personal change and that the networking opportunities "have implications that extend beyond loan repayment and even the economic development promoted directly by the enterprises financed" (p. 364). Interestingly while the GB will grant education loans for the children belonging to the woman, there is no concept of the woman accessing a loan for her own education. This becomes relevant when we return later to the concept of Internet training in microfinance.

However the latter comment aside, this article focuses more on the GB which has been lauded for its efforts in bringing credit and savings access to poor women and their families. This does not indicate however that the GB is the only, or the best, provider in this respect. Indeed there have been many criticisms of the GB with respect to the low number of women it actually employs, but there is no question that it has been most successful in improving the lives of poor villagers through working with women. There can also be no doubt that the majority of those Bangladeshi women would not want to be denied access to such credit (author's interviews with many women in Bangladesh, April, 2000).

Background on the Grameen Bank

In 1983, Professor Muhammed Yunus established the GB of Bangladesh for the purpose of poverty alleviation for the assetless poor. Begun in 1976...

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