Issues and Challenges

Microcredit: A Potential Instrument for Women’s COVID-19 Economic Recovery

Across the globe, an overwhelming amount of evidence is substantiating the disproportionately adverse effects of COVID-19 on the livelihoods of vulnerable groups, especially women; Pakistan is no exception to this trend. The main reason being that a large percentage of Pakistani women are working in the informal sector. The informal sector does not provide them with social protection, therefore, they have low income and have fewer savings. Contextually, these claims have been given substance by evidence produced by the National Disaster Management Authority (NDMA) and UN agencies. Evidence suggests that various humanitarian crises in the past, including the earthquake of 2005 and the floods of 2010, led marginalized groups to suffer disproportionately due to the pre-existing unequal power and gender relations. 


 


In the particular context of COVID-19 crisis, the Human Rights Watch (HRW) warned the authorities in Pakistan that the closure of businesses and lockdown would cause enormous consequences on domestic and home-based workers, as well as textile and garment workers. According to ILO, “There exists no authentic statistical data on women home-based workers in Pakistan; by one estimate there are 20 million women working in the informal sector in Pakistan of whom 4 to 7 million are women home-based workers.” A significant proportion of women in the rural areas have also been reported to have lost income due to their inability to sell agri-products during phases of complete and partial lockdowns. Additionally, crises like these create an enormous economic pressure on the household and may in turn pressurize the girls into dropping out from schools, eventually affecting their labour market participation in the future. 
Considering the aforementioned realities, it is imperative that the government as well as the non-governmental sector implements an equity-based approach to address the long-term impacts of the pandemic by addressing the economic needs of the vulnerable women including the young, the disabled and those living in rural areas. In this context, microcredit can serve as a powerful instrument to fight the pandemic induced poverty and economic vulnerability of women by allowing them to build their assets, raise income and protect themselves against external shocks. Since the beginning of the pandemic, microcredit analysts expressed their expectations of the positive role that the microcredit sector can play in combating the negative impact of the crisis on the economic security at micro level. 
In Pakistan, the history of microfinance dates back to the establishment of Agha Khan Rural Support Program (AKRSP) in the 1980s initiated the Orangi Pilot Project (OPP). Today, there exists a well-developed microfinance sector providing microcredit to the poor and the unemployed consisting of Rural Support Programs (RSP), NGOs, specialized microfinance banks and Islamic microfinance NGOs. A substantial amount of evidence suggests that microfinance in general and microcredit in particular increases the standard of living, satisfaction of life and sense of dignity of the vulnerable and the marginalized while also enhancing their social status. However, it is noteworthy to highlight that microcredit programs, in order to engender positive impacts on a monumental scale, ought to be complemented by other inputs including the inculcation of the requisite skills in order to fill the knowledge and skill gap, which hinders any productive employment of credits on the part of recipients. These skills may include knitting, quilting, weaving, lacemaking, patchwork, baking, cooking, floristry, stone carving, soap making, leather bag making, calligraphy, among others and should be provided based on the pre-existing potentialities of the clients. Along with this, there is a need to instill them with certain basic computer skills, such as making spreadsheets on Excel and word processing among others as well as social media marketing skills. For the COVID-19 economic recovery of women, these complementary inputs can have a huge impact in attaining the desired results at micro level.  
In this respect, “Don’t let corona impact your business” initiative led by Kashf Foundation, which involves the provision of financial and non-financial services to female entrepreneurs to rebuild businesses, needs commendation. In terms of the non-financial services, the foundation has provided the much-needed training on how to generate/create sales in low demand phases and increase efficiency of businesses. This initiative has rightly earned the Foundation the COVID-19 Action Award at the UN Women Asia-Pacific Women’s Empowerment Principles Awards. While such initiatives need to be expanded, there is also a need for the inclusion of women apart from micro-entrepreneurs within these initiatives who have also borne the dire socio-economic impact of the crisis. In order to supplement the activities of the non-governmental sector, the government needs to operate microcredit programs as a component of its COVID-19 recovery response. It is worth mentioning that the governmental assistance in form of partnership can help offset the adverse impacts of the crisis on the operations of microcredit providers in the non-governmental sector due to their inability to receive loan repayments amid the reduction in household incomes.  



Additionally, while a number of credit programs often reflect the male-breadwinner bias by assuming the needs of the womenfolk to be met through the provision of credits by their male counterparts. They stand oblivious to the fact that a woman’s positioning within the household and relationship with the head of the household may not allow her to benefit from credit programs targeted towards the male members in hopes of addressing the needs of the entire family. Hence, in order to be gender equitable, the credit programs must target individual women separately.
Last but not the least, the use of microcredit for women’s COVID-19 economic recovery can create a positive spillover on the economic recovery efforts at  macro level and have a lasting impact on the economy. Former Secretary-General of the United Nations Ban Ki-moon said: “As many microcredit schemes across the world can testify, investment in women is the best investment for the future.” Microcredit interventions can, thus, help capitalize the untapped potential of women by allowing them to invest their potentials into small businesses. This can contribute to economic growth by increasing the labour force participation and raising the demand for consumption goods, which can help stimulate the local market.  In this respect, the pandemic itself provides an immense opportunity for women in general and housewives in particular to participate in the economy by working from home. This alternative allows all women, especially, those who were unable to leave their homes for work, to play a more contributive role in the economy. Recent research indicates that home-based businesses have been booming under COVID-19 crisis. In the words of one retailer: “Since the announcement of stay-at-home orders, a majority of customers are likely to prefer buying clothes online instead of visiting shops physically to avoid interaction with people.” From my personal experience too, I have seen certain extended family members being able to begin and run successful home-based businesses during the pandemic with an extraordinary demand. This does not, however, deny the fact that the informal economy has been affected by the pandemic. But the entire point is that while some opportunities have fallen through, many others have been making their way and home-based businesses are becoming ever more common with people discovering new and creative ideas for income generation. This not only offsets the initial setback to the informal sector but will eventually help expand the latter. The right intervention at this point could be to provide women with the financial capital and human capital by equipping them with the required skills according to the new market demand while also training them on how to ensure a sustained demand. For this purpose, microfinance interventions can prove monumental. This could ultimately turn the crisis into an opportunity by allowing many women to be able to finally contribute to the economic activity of the household and the state.
Adding to this, it has also been proved that women reinvest a large percentage of their earnings into their household. This suggests a lot about the potential benefit that investment in women can have on the economy and the society by allowing them to change the outcomes for their children who can then serve as valuable assets. This brings home the conclusion that microcredit interventions targeted towards women can help achieve the dual objective of women’s much-needed COVID-19 economic recovery and long-term economic boost. HH


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