Sunday, May 9, 2010

The Economics of Female Empowerment

I am still working on a discussion of Gail Collins' book America’s Women. My focus seems to be narrowing down to how economic issues dominated women’s history in this country. The focus on economics reminded me of several recent references to women’s role in the world that touch on inequalities between the genders.

Consider Niall Ferguson’s comments in his recent best seller The Ascent of Money.

"The great revelation of the microfinance movement in countries like Bolivia is that women are actually a better credit risk than men.....Indeed it goes against the grain of centuries of prejudice which, until as recently as the 1970s, systematically rated women as less credit worthy than men. In the United States, for example, married women used to be denied credit, even when they were themselves employed, if their husbands were not in work. Deserted and divorced women fared even worse. When I was growing up credit was still emphatically male. Microfinance, however, suggests that credit worthiness may in fact be a female trait."Dambiso Moyo also addressed this theme in her book Dead Aid. A general discussion of this book was posted earlier. Moyo explains how this concept of microfinance was implemented and grew to be so successful. She illustrates the approach of the Grameen Bank in Bangladesh. In 2006, Muhammad Yunus was awarded the Nobel Peace Prize for his work in this area.

"Professor Yunus’s innovation was to find a way to lend to the poorest of the poor who have no collateral.....Looking across Bangladesh, Yunus realized that although many villages had no obvious visible asset, they all shared one thing—a community of interdependence and trust. The genius behind Yunus’s Grameen Bank (literally translated from Bengali as ‘Bank of the Village’) was in converting that trust into collateral."The way this works is to collect a number, say five, of applicants from a village into a team. An agreement is made with the team that the Bank will make a loan to one member of the team for that particular member’s project. If at the end of the loan period the loan has been paid off, then another member will have his/her project funded. If not, then no further loans will be made. This is the genius of the approach. There is tremendous peer pressure on the person receiving the loan to deliver, but there is also tremendous incentive for the other members of the team to help in any way possible. Moyo claims that 97% of Grameen’s loans are awarded to women, and loan defaults are minimal. She quotes a precise number of 5% for microfinance loans in Zambia.

There is an article in the May/June, 2010 edition of Foreign Affairs magazine by Isobel Coleman entitled The Global Glass Ceiling: Why Empowering Women is Good for Business. Coleman is Senior Fellow for U.S. Foreign Policy and Director of the Women and Foreign Policy Program at the Council on Foreign Relations. The theme of this article is that large commercial organizations are beginning to realize and act upon the knowledge that economically active women are good for business.

"When women are educated and can earn and control income, a number of good results follow: infant mortality declines, child health and nutrition improve, agricultural productivity rises, population growth slows, economies expand, and cycles of poverty are broken."In fact, there is at least circumstantial evidence to suggest that gender inequality is a cause of poverty.

"Entrenched gender discrimination remains a defining characteristic of life for the majority of the world’s bottom two billion people, helping to sustain the gulf between the most destitute and everyone else who shares this planet." The interesting news that Coleman brings is that large multi-national enterprises, acting in their own self interest, are contributing significantly to efforts in education, training, encouragement of entrepreneurship. One of the main reasons for hope in this area is that these organizations can deliver funds at an enormously higher level and often more effectively than traditional aid or charitable efforts.

"As multinational corporations search for growth in the developing world, they are beginning to realize that women’s disempowerment causes staggering and deeply pernicious losses in productivity, economic activity, and human capital....Not only does the global private sector have vastly more money than governments and nongovernmental organizations, but it can wield significant leverage with its powerful brands and by extending promises of investment and employment."Some of the organizations who are given props might be a bit surprising: Goldman Sachs, Walmart, Nike, and the United States military. Our military is trying to set aside funds for contracts with Afghan businesswomen to provide supplies.

"In Afghanistan, the United States has made strengthening the role of women in Afghan society a central element in its counterinsurgency strategy.....the U.S. military has held several training courses to educate Afghan businesswomen on how to meet quality standards and navigate the complicated ‘request for proposal’ process."Consider the potential power that Walmart can wield with its immense size and resources. Given that roughly 75% of its employees are women, it has a clear incentive to help its women become more productive. Besides training and education assistance, Walmart realizes that it would have a better business plan if it had more reliable local producers of products like clothing and foodstuffs.

"The potential for female employees and suppliers in the developing world is enormous: if Walmart sourced just one percent of its sales from women-owned businesses, it would channel billions of dollars toward women’s economic empowerment—far more than what international development agencies could ever muster for such efforts."It is nice to hear a positive take on capitalism and markets and enlightened self-interest. It has been a while in coming. The material presented here is complemented by the discussion of Moyo’s book, Bad Aid.

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