Small Loans: Big Hopes

Can economic empowerment programs give women the skills and power to reduce their risk of HIV?

By Catherine Zandonella

The shanty areas of Nairobi, Kenya are home to thousands of adolescent girls and young women, many who have migrated from rural areas. More than half of the girls aged 15 to 17 in these slums are living without parents and the vast majority are not attending school. Many are too poor to afford school fees, while others are forced to drop out of school to take care of extended family members affected by HIV/AIDS. The poorer and more isolated the girls, the higher their risk of HIV.

Here and in many other regions of the world, women have little standing to negotiate HIV prevention in their personal relationships. Intimate-partner violence, as well as poverty, is intricately linked to a higher risk of HIV throughout sub-Saharan Africa.

Establishing gender equality in these communities is a priority, and this goes hand in hand with economic empowerment. “If young people have financial capacity, you would expect a stronger ability to negotiate sexual relationships,” says Evelyn Stark, a microfinance specialist at the Consultative Group to Assist the Poor (CGAP). Empowering women economically could help them work their way out of poverty, gain independence, refuse unwanted sexual advances, and successfully negotiate condom use, contributing, some researchers hope, to an eventual reduction in HIV transmission.

One way to supply women with financial capacity and independence is through microfinance initiatives. The idea is to provide women with small loans, typically just a few hundred US dollars, which could provide the foothold they need to start small businesses. Perhaps even more importantly, microfinance programs can provide a forum for women to give and receive moral support, which may help them challenge the acceptability of intimate-partner violence, learn to expect better treatment from their partners, and begin to mobilize public awareness about gender-based violence and HIV infection.

Microfinance programs have already provided economic opportunity for millions of women worldwide. Now a handful of researchers are testing the hypothesis that these programs can also foster an environment that empowers women in their sexual relationships, allowing them to create societal changes that could help stabilize the AIDS epidemic in sub-Saharan Africa, where 75% of all new HIV infections occur in females between the ages of 15 and 24.

Microfinance and HIV

Microfinance programs typically provide small loans, savings, or other financial products, including credit and insurance, to individuals who could not historically access loans because they lacked the types of collateral—land or personal savings—that banks and lending institutions require. In the 1970s, microlending emerged as a viable way to stimulate economic development among the poor. Since then it has been applied successfully throughout the world. The pioneer of this concept is Muhammad Yunus, founder of Bangaladesh’s Grameen Bank and recipient of the 2006 Nobel Peace Prize.

In microfinance programs, loans can be provided directly to single individuals or to small groups of collective borrowers. Although there are many ways to run a microlending program, one of the most popular is based on the concept of group lending, in which borrowers pool their savings as collateral for a loan. Although the loans are made to individuals, it is the group that is held responsible for repayment. In some models, the group’s savings is used to make the payments in case of default, while in other models a village leader determines how to handle repayment. In either case, the success of these programs—repayment rates are typically well above 90%—depends in large part on the group pressure to repay the loans.

During the 1970s and 1980s when microfinance programs were first initiated, microfinance institutions (MFIs) focused mainly on loans and less on training or education. However, throughout the 1990s, concerns that microfinance programs were failing to reach the very poor led to the practice of teaming credit services with training on business development, literacy, and community building skills. “Microenterprise development [which includes microfinance, market development, and business readiness] is one of the leading economic tools being applied globally,” says Mary McVay, a program director at the Small Enterprise Education and Promotion (SEEP) Network.

On the surface microfinance programs and HIV/AIDS programs seem to have little in common. But advocates of microfinance initiatives, especially in sub-Saharan African countries where AIDS is so shockingly prevalent, cannot ignore the disease. Loan programs suffer when participants or employees become ill or must leave their business to care for family members with HIV/AIDS. As a result, the US Agency for International Development (USAID) and other organizations are now supporting the integration of microfinance programs and HIV/AIDS education. One such program, Defining Options, was created by the non-governmental development agency, Development Alternatives, Inc. (DAI), with support from USAID. The program advises MFIs that are partnering with AIDS service organizations. “One thing we try to encourage the MFIs to think about is their policies with regard to affected clients,” says DAI’s Lauren Mitten. This includes offering credit insurance, which will pay off the loan in case of death, or health insurance to clients affected by HIV/AIDS.

The popularity of microfinance programs, it turns out, also makes them excellent venues for reaching people with messages about HIV prevention, as well as stigma reduction. In Mozambique, 32 MFIs regularly reach an estimated 100,000 clients, who tend to be mature African women who are leaders in their communities. “This is an incredible platform for a whole range of public health and HIV/AIDS interventions,” says Guy Winship, who initiated the link between HIV/AIDS education and microfinance during his tenure as managing director of FINCA Uganda, one of the country’s largest microfinance organizations.

Women’s Empowerment

Educating women about HIV/AIDS is an important step, but many public health researchers hope that microfinance programs can go even further, helping women gain the self-esteem and negotiating power they sorely lack in their personal relationships.

A study in South Africa’s Eastern Cape found that roughly 30% of young men reported perpetrating physical or sexual violence against their main sexual partner during the past year. These same men also engaged in significantly higher levels of HIV risk behavior than their non-violent peers. Many women fear bringing up HIV prevention with their partners because it might arouse suspicions of infidelity, and result in physical violence.

Promoting female empowerment is the goal of an ongoing program in South Africa called Intervention with Microfinance for AIDS & Gender Equity (IMAGE). Female empowerment involves acquiring knowledge and understanding of gender relations, developing a sense of self-worth and the right to control one’s life, gaining the ability to exercise bargaining power, and developing the ability to create a fair social and economic order. The IMAGE study combines gender-based health education conducted by Rural HIV and Development Action Research (RADAR), a collaborative program between the University of the Witwatersrand and the London School of Hygiene and Tropical Medicine, with microcredit provided by the Small Enterprise Foundation (SEF), a microfinance institution with over 40,000 clients in South Africa. “We wanted to pair microfinance with specific training on gender and HIV,” says Julia Kim, a senior researcher with RADAR. “Bringing women together to meet their basic needs and the resulting social capital and engagement with communities would be kind of a springboard for HIV prevention and talking about gender-based violence that you don’t get with most health interventions.”

IMAGE participants in South Africa organized their village’s first march for the international campaign “16 Days of Activism to End Domestic Violence,” and made headlines in their local newspaper. Photo courtesy of The Steelburger Newspaper

In the IMAGE study, women participated in a microfinance program in which they received loans to start small businesses and routinely engaged in educational sessions that covered topics such as healthcare, gender relations, domestic violence, and HIV prevention.

The project was designed as a randomized trial and researchers followed several thousand households over a two- to three-year period in Limpopo Province, a rural region of South Africa. Villages either received the microfinance/education intervention immediately or were used as a control group, which was offered the intervention at the end of the study period. After two years of follow up, researchers used questionnaires to evaluate the direct effect of the combined intervention program on participants’ economic well-being, their levels of empowerment, and the rates of intimate partner violence. HIV risk was also assessed among female participants who were considered at highest risk, in this case, those younger than 35.

The results were encouraging. Researchers found that households that received the microfinance and training intervention had improved their economic status. They also observed improvement in the level of women’s empowerment using all the markers they originally set: self-confidence, financial confidence, willingness to challenge gender norms, autonomy in decision making, perceived contribution to and communication within the household, status of their relationships, and membership in social groups. Futhermore, levels of intimate partner violence were reduced by 55% among women in households that received the loans and training as compared to other households, during the last year of the study (Lancet 368, 1973, 2006 and Am. J. Public Health 97, 1794, 2007).

Also, among women younger than 35, there was a significant increase in uptake of voluntary counseling and testing services for HIV, higher levels of condom use with non-spousal partners, and improved communication about HIV/AIDS within their households, Kim says.

Now, new research from the IMAGE study is comparing the combined microfinance and training package with microfinance services alone. Preliminary findings suggest that although microfinance provides clear economic gains, the combined intervention offers broader benefits, particularly in relation to women’s empowerment and reducing intimate-partner violence. “The findings suggest there is added value in terms of the gender training,” says Kim.

A panacea?

Despite positive results, there is a concern that microfinance will be oversold as an intervention that can empower women, says Stephanie Urdang, currently with Rwanda Gift for Life. “If a woman can figure out with some support how to generate income,” says Urdang, “then clearly she is in a much stronger position to resist violence, to be able to be independent, to make her own choices. But sometimes people have seen this as a panacea—that all women need is a leg up and once they’ve got an income, then they can move ahead and take control of their lives.”

Indeed, economic empowerment alone does not automatically enable women to control their own sexual and reproductive health. In some cases, it may make it more difficult.

This was apparent in one program, known as Shaping Health of Adolescents in Zimbabwe (SHAZ), that sought to directly empower young women with microfinance initiatives. It started in 2001 with the aim of providing small loans to adolescent females and young women who were interested in starting a business. But rather than empowering the vulnerable girls who participated in the study, in many cases having income drew the attention of men in the community and made the girls in the SHAZ program subject to more sexual advances because it drew attention from men in the community. As journalist Helen Epstein wrote last year in her book, The Invisible Cure, “The researchers had not anticipated that their program to ‘empower’ these poor women was actually placing them right in the path of HIV.”

Researchers found that the social networks established by the girls were what provided the most benefit and many participants reported greater knowledge of safe-sex practices at the conclusion of the SHAZ study. The few girls that did succeed economically received strong support from friends, guardians, or family members, especially ones who already possessed business skills. “It is not the money that empowers them,” says Epstein. “It is the collective solidarity and support that they get from each other. That comes from them coming together either through a program that is organized, or spontaneously through a kind of social movement for women’s rights.”

A similar conclusion was reached by researchers involved in another microfinance program centered on reaching young girls who live in the slums of Nairobi. This program, called Tap and Reposition Youth (TRY), provided business education, mentoring, and small loans through a multiphase initiative undertaken by The Population Council and implemented by the Kenyan microfinance institution, K-Rep Development Agency (KDA).

Through churches and youth groups, the TRY program recruited 25 women between the ages of 16 and 22 to join five-person lending groups. Only 12% of participants lived with both parents, while others lived in single-parent households, were themselves head of the household, or lived with a boyfriend or husband. One quarter of the girls who participated in the TRY program reported having traded sex for money, rent, or gifts.

With increasing poverty comes an increased likelihood that their first sexual experience was non-consensual, occurred at an earlier age, and didn’t involve a condom. “You have girls who have been involved in [HIV education] programs for a long time say ‘I had to have sex with my boyfriend without a condom because I needed to pay the rent,’” says Judith Bruce of The Population Council. “They have complete information, they are just economically vulnerable.”

All participants received six days of training on business planning, life skills, and gender roles before they started contributing small amounts of money each week to a group savings account, which constituted collateral for a loan. After the loan was secured, each participant was allowed to take a portion of the money, ranging from US$40 to $200, on a rotating schedule to establish a small enterprise such as a food stand, a business buying and selling used clothes, or hairdressing.

The program got off to a strong start, but eventually repayment rates started to slip and girls dropped out of the program to protect their savings. At one point, loan officers required an adult guarantor to pledge to repay the loan in case a girl defaulted. This had the unintended consequence of increasing the girls’ vulnerability, rather than reducing it.

As with SHAZ, the traditional microfinance structure worked for only a small subset of girls in the TRY program—those with the most advanced knowledge of business and with strong family or entrepreneurial support. Researchers noted that for many of the girls, the weekly meetings and social connection was far more important than starting a business. In response the TRY researchers beefed up the social support and counseling aspects of the program, adding seminars addressing gender-based violence, women’s rights, communication in relationships, family planning, and HIV/AIDS education. Despite the popularity of these programs, girls continued to drop out, largely over concerns about losing their savings. The project officers have now instead focused on a savings club based on the same group model as the initial microlending program.

Even though the TRY program had limited success as a microfinance initiative, researchers did find it had promising results. “Given limitations, [the] findings are not conclusive,” says Annabel Erulkar, of the Population Council, who worked on the TRY project. “However, there are indications that, among girls for whom microfinance is appropriate, it may result in greater negotiating ability within their relationships, including negotiating for safer and consensual sex.”

Targeted approach

While microfinance may not be the magic bullet for reducing HIV transmission, study results indicate that targeted approaches offer several benefits. Bruce and her colleagues who worked on the TRY project have suggested a tiered approach to microfinance, in which younger, more vulnerable girls begin with basic financial education and life skills training and then move on to financial, vocational, and business training. Once the fundamental elements are in place, they can then take advantage of economic options, such as microcredit. “The key is to have the girls select the level of risk, rather than us impose it,” says Bruce, referring to the progression from learning about finance and saving to eventually taking out a loan.

Another approach is to implement even more targeted and shorter term initiatives. One example of this is a microfinance program along the shores of Lake Victoria in Kenya, where the HIV prevalence hovers around 35%. The Kenya Business Development Services Program, with support from USAID, offers one-day loans to very poor women who participate in a practice known as “sex for fish.” Instead of trading sex for fish, which the women could then sell at market for a profit, they receive small loans to buy fish. At the end of the day, after they have sold the fish, they can repay the loan and keep the profit.

This type of program, which is targeted at certain populations, and others that are more broadly aimed at changing societal norms, could help alter the vulnerability of girls and young women and are one more way researchers are attempting to impede the spread of HIV in sub-Saharan Africa.