What is Microcredit and How Does It Work for Women?

Small is better: microloans go a long way in creating economic security in developing countries and Plan has many microcredit programs that help women and children to have sustainable incomes all while being involved in their communities. But what is microcredit exactly?

My professor once told this story to describe how microcredit works:

On his way to the office every morning, a man saw a woman selling pineapples near his work. He ate at her stand a lot, and noticed that she worked hard for the small amount she got each day. One day, he asked her what would make the biggest different for her business, and she replied, "If I just had $50, I could buy a second cooler and I wouldn't have to go back home to refill mine with more stock in the middle of the day. It takes a long time and I can't sell pineapples during that time." He gave her the $50, and within a short time she had doubled her pineapple sales and paid him back the $50. The man realized just how much difference a very small amount could make.

For a more technical answer, here's a great wiki page on what and where the idea for Microcredit came from! Basically the way these programs work is by giving small loans to farmers or small enterprises that are easily accessible and have low interest rates and often the money that is paid back goes into community funds or lent out to other people who need them.

Hilary Clinton kind of sums it up in this quote:

"You know the proverb, Give a man a fish and he'll eat for a day, but teach a man to fish and he'll eat for a lifetime…Well, if you teach a woman to fish, she'll feed the whole village"

It has been shown that women are often more successful in using microcredit programs to finance their households then men, and are more likely to share their resources among their community. The best microcredit loans go hand and hand with skill building and training programs. In Mali West Africa a Plan International program gives farmers the chance to access credit and when the farmers pay back the loan portion of the financing, the money goes into a community fund. This money is then used for more agricultural projects but also the money goes into education, health programs and other community needs.

By giving women the ability to improve their economic security we create a ripple effect. By empowering and improving the lives of women, they become teachers and advocates who pass on their knowledge and expertise to their community and to their children.

For more information, visit BecauseIamAGirl.

Melanie Gorka is an advocate of women's issues and a fan of Plan Canada's Because I am a Girl. She is a Guest Blogger for Plan Canada's Because I am a Girl blog. For more information, visit Because becauseiamagirl.ca.