Why microloans can set some poor women back even further: via nytimes
Amira Hawamdeh borrowed money to start a small business but also simply to pay her bills. Now Ms. Hawamdeh, a mother of seven, owes $613 and fears imprisonment.RUSSEIFA, Jordan — Five years ago, Amira Hawamdeh took out a loan for $423 to buy buttons and yarn to make purses and sweaters, and winter blankets to sell to her neighbors.
Increasingly, as women in Jordan take out microloans to tackle unemployment and poverty, they are becoming trapped in a system that was supposed to help them. Hundreds of unregulated loan shops operate in Jordan’s thriving microloan market, offering easy credit but also high interest rates and penalties, and the threat of jail if the loans are not repaid.
Legal microfinance companies are calling for more oversight to crack down on deceptive practices that could tar the entire industry. Activists and relatives of people in debt have held protests twice in Amman, the capital, in recent months, calling for a repeal of the law allowing a creditor to demand a debtor’s imprisonment.
Jordan, with an unemployment rate of nearly 20 percent, was a ready market. Even for those who have jobs, the average monthly income of $637 fails to cover basic expenses.In addition to loans, women who have built successful home-based businesses have usually had financial mentoring, family support and a realistic marketing plan. Women managing home businesses are usually still expected to do all the housework and take care of their children.
Microloans have interest rates ranging from 22 percent to 50 percent, and many loan outfits charge a processing fee of $70 to $280 on top of that. In some cases, the interest rate may increase if payments are late.
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