FRIDAY FILE: Microfinance is often regarded as having significant potential to alleviate poverty. Despite some success stories, though, micro-credit arrangements with unscrupulous lenders frequently contribute to making bad situations worse by driving women deeper into poverty and desperation. Many Dalit women have experienced the down-side of microcredit, the most common form of microfinance.
By Kathambi Kinoti
Dalit peoples in South Asia are a disadvantaged group. Historically they have faced discrimination as they are considered to be a lowly caste. Regarded as ‘untouchables,’ they historically performed work that was ‘unclean.’ They did leatherwork, cleaned the sewers, disposed of animal carcasses, swept the streets and did other work that was regarded as ‘polluted.’ Today, Dalits are often still regarded as outcasts and their ‘unclean’ status stems either from their actual occupation or from descent.
Discrimination against Dalits
India’s constitution seeks to protect Dalits against discrimination, and prescribes measures to improve their social and economic status. However, the relevant provisions of the constitution conceive Dalits as Hindus, with the result that non-Hindu Dalits are further disadvantaged over and above their outcast status.
Despite legal protection, social taboos prevail to perpetuate discrimination against Dalits, particularly against those who still live in rural areas. They face social exclusion and are even threatened with physical abuse for not performing the menial work that is regarded as being their domain. There are numerous forms of discrimination against Dalits, which in turn have further implications for their well-being. In localities that have no piped water, they have limited access to wells. Dalits are commonly prohibited from eating with other people and they drink from separate glasses in village tea stalls and eat with separate utensils in restaurants which have discriminatory seating arrangements.
The Situation of Dalit Women
Most Dalit women experience triple oppression: “as Dalits, as women and as poor”. Not only do their caste and gender converge to disadvantage them but they are also likely to be poor and have little or no formal education. About 76% of Dalit women cannot read and write. This high illiteracy rate has tremendous negative implications for the progress of Dalit communities.
Their social and economic status precludes them from making choices that would improve their situation. With the increase in mechanisation of farming processes, along with an emphasis on the cultivation of cash crops at the expense of food crops, women have been deprived of jobs. Moreover, communal resource areas in villages, where women used to harvest fish and vegetables, have been converted for the production of commercial cash crops.
Dalit women are vulnerable to sexual violence, including gang rapes, and they face numerous barriers in seeking redress for injustices perpetrated against them. Under the devadasi system young Dalit girls are frequently dedicated to a temple deity, a practice which violates multiple rights, including their sexual and reproductive rights.
Harsh economic conditions have compelled Dalit men to migrate to towns and cities, leaving behind households headed by women. Social and economic conditions mean that these women and their children are further impoverished.
The Promise of Microcredit
Microfinance refers to financial services available to the poor: credit, funds transfers, insurance and savings. The most common form of microfinance is microcredit.
In 2006, the Bangladeshi economist Dr Mohammad Yunus, founder of the microfinance institution the Grameen Bank was awarded a Nobel Peace Prize for his pioneering work in availing financing to the poor in Bangladesh. Yunus’ philosophy is that very small loans can make a huge difference in the lives of poor people, and that the support of entrepreneurship is key to poverty eradication
Banks are generally loathe to provide small loans to people, not only because their returns are unlikely to be high, but also because poor people often do not hold property to secure these loans. Microcredit provides business capital to many poor people who could not otherwise access the modest start-up capital that they need to go into small-scale business. In India alone, according to a BBC news report, 30 million people have taken microcredit loans since the concept was first established. Microfinance has been regarded as an optimal capital-raising solution for poor women who cannot otherwise access credit.
Most of Grameen’s customers are women, and Yunus has said that often poor women are the most effective managers of scarce resources. Poor women face numerous challenges in accessing credit from mainstream financial institutions. They often do not have land to offer as security for loans, nor sureties to guarantee repayment. Microfinance institutions do not require the onerous conditions that mainstream banks impose on their credit clients. In many cases all that they require is for women to form themselves into self-help groups whose members stand surety for one another. The success of the microfinance system is based on an observation that poor people rarely default on payments and that if anyone does, their self-help group partners will step in to raise the money for their defaulting colleague. Women often use microcredit to buy sewing machines, set up food stalls or buy livestock whose products can be sold for profit. Many women have also used microcredit to address immediate financial needs such as school fees.
Microcredit Does Not Always Benefit Women
Microcredit consists of small amounts of money lent to a customer at a time. Often, women receive small, one-off loans that alleviate an initial need, but that do not help them expand beyond small-scale business. This means that beneficiaries do not necessarily see an improvement in their financial status in the long term.
While microfinance has certainly benefitted many women, many others have been adversely affected. According to a BBC news report[i], a rural community in the state of Andhra Pradhesh in India experienced a spate of suicides which were linked to recipients of microcredit being unable to service debt repayments. As a result of this the state government has reportedly cracked down on the operations of exploitative money lenders. Several of the people who took their own lives were Dalit women.
According to Fatima Burnad of the Tamil Nadu Women’s Forum, originally, micro-credit was the domain of government and non-profit organisations. The Indian government encouraged women to set up groups to save and get credit from its micro-lending scheme, the Women’s Development Corporation. These kinds of schemes encouraged savings and had reasonable interest rates and repayment conditions. Government and NGO-based models were not profit-oriented.
These opportunities have, however, been overshadowed by the rise of exploitative profit-making microfinance lenders. These lenders offer credit only: no insurance, savings, money transfer, investment or other options. They accept the surety of women’s groups but impose exorbitant interest rates. “The women’s groups that the lenders insist must be formed have no real benefit to the women,” says Burnad. They are mainly a mechanism to ensure that the micro-credit institution can demand repayment from several other people, should the principal default in remitting a loan installment.
These microfinance institutions are non-banking institutions. They are registered by the government but there is no proper regulatory framework to govern their operations. “They are unregulated and un-monitored,” says Burnad. She adds that there are few avenues for women to raise their concerns, because the police are often compromised by the microfinance institutions, who corrupt them so that they may act with impunity. Burnad says that when cases of exploitation are reported to the authorities, the victims are often questioned as to why they borrowed money in the first place.
Dalit women often get trapped in a cycle of debt as a result of their engagement with these microfinance institutions. They demand weekly repayments and impose other harsh conditions which the women are not aware of before they take the microloans. Moreover they do not receive sound financial advice when entering into loan agreements with the institutions.
According to Burnad women should be able to access zero interest state government credit to set up businesses. She would like state micro-credit to be available to individual women without the requirement that they be part of a women’s group.
Dalit women’s organisations are actively advocating for the micro-finance sector to be regulated. She says that in some localities in India, women have driven micro-credit institutions away from their villages because of the perils that fellow women across the country have faced as result of these institutions.
Burnad says that the Tamil Nadu Women’s Forum, the Tamil Nadu Dalit Women’s Movement and the All India Democratic Women’s Association held public hearings to discuss the conduct of microfinance institutions following the suicide of a Dalit woman in the town of Vellore Tamil Nadu state. They petitioned government officials to take action and demanded compensation for the woman’s family. Five members of microcredit institutions in the district were arrested.
According to Burnad, however, the government does not take the regulation of the micro-finance sector very seriously. She says that there is a lot to be done in the months and years ahead. The collective of women’s rights organisations that have been part of ongoing advocacy efforts are planning to l file a public interest litigation case against the government of India. They will also fight for compensation for families of people who have committed suicide as a consequence of the exorbitant lending conditions of MFIs.
[i] See the video preceding the linked news report.