Fostering Successful Entrepreneurship among Women through Lending, Training, and Health Promotion
At Deetken Asset Management Inc. (DAMI) we are committed to achieving double (and in some cases triple) bottom line results - delivering strong and stable returns to our investors through investments that have a positive social and environmental impact. Our partners at Pro Mujer share this mission. With over 25 years of micro-lending in five countries (Peru, Bolivia, Nicaragua, Mexico, and Argentina), Pro Mujer is one of Latin America’s leading developmental organizations focused exclusively on women clients. Deetken has been providing much needed capital and technical assistance to support Pro Mujer’s lending activities for over six years, and we consider Pro Mujer International (based in New York City) a strategic partner.
Each of Pro Mujer’s operations faces its own opportunities and challenges. Argentina’s underserved northern region is no exception, where people face poverty, experience poor health outcomes and have little access to financial opportunities. The economic depression in the early 2000’s resulted in the closing of many banks and increased unemployment and poverty throughout the country. Since then, Argentina’s economy has been slowly recovering, but the impact is still being felt in the country’s poorest regions. Although the economy has been improving since 2003, it is still difficult for banks and microfinance institutions to borrow capital, which in turn creates strict lending requirements.
There are few microfinance institutions like Pro Mujer in Argentina. Most financial institutions are unwilling to provide loans to those with low incomes, the so-called bottom of the pyramid. There are several reasons for this:
- The country has high inflation caused by interest rates, a result of a previously closed economy and a history of protectionist policies. This means that outside capital was, and still is, hard to come by. The limited capital and high interest rates heavily contribute to the lack of microfinance organizations.
- Many of the poor work in the informal sector and are unable to provide physical evidence of their income to qualify for loans. Those who do have the proper documentation typically do not require a large enough loan to meet the minimum requirement for established banks.
- Unlike Canada, loan interest from an independent financial entity in Argentina is subject to a 21% value-added tax. Rate subsidies and tax deductions are only available to businesses in the formal economy, making it expensive for business in the informal economy to get a loan. For a business to transition from the informal to formal economy, they are subject to a 35% business income tax and immediate retroactive taxes and penalties. This is a deterrent that prevents most informal entrepreneurs from transitioning out of the informal economy.
These dynamics make it very difficult, if not impossible, for many families to escape the poverty trap. This is where Pro Mujer comes in. By providing access to affordable loans for low-income women entrepreneurs, the organization is serving a segment of the population that would otherwise have a very hard time accessing credit. In addition to capital, Pro Mujer offers a comprehensive program focused on helping aspiring women entrepreneurs to build their capacity as business owners while also enabling access for themselves and their families to health care and educational training.
In order to receive a loan through Pro Mujer, women are required to attend training in business management, life-skills, and health care. Health care training includes educational classes on preventative care and nutrition. This approach is not only altruistic: it is good business. Pro Mujer’s involvement goes beyond the exchange of a loan. By promoting health, business, and personal competence, Pro Mujer creates the foundation for the success of its clients. The results have shown that this approach works: default rates for loans are extremely low and currently stand at less than 0.5%.
Pro Mujer in Argentina administers the majority of their loans using a group structure that resembles a small corporation. This method has proved to be very beneficial for both Pro Mujer and its clients.
Pro Mujer takes an active role in each investment. One method they have found particularly effective is “group lending.” For a majority of the loans administered in Argentina, the recipients are required to have a working management structure where women are responsible for both their personal success and the success of the group. The management structures reinforce accountability, leadership, risk management, and focused responsibilities.
The group is required to attend reoccurring sessions that consist of a meeting, educational training, hands on training, and loan disbursements. A Pro Mujer advisor supervises the sessions, providing assistance when needed.
During the meeting, the group handles all processes, roles, and responsibilities in accordance with the group management structure. Any outstanding issues or concerns are addressed and managed with the guidance of the Pro Mujer advisor, if necessary. Typically, the atmosphere of the meeting is positive and each woman is encouraged to contribute. The group members rotate through the four roles: president, cashier, secretary, and health promoter, providing each woman with a range of experience in leadership and communication. Members of the group receive regular evaluations of their performance in each role, which increases confidence and helps Pro Mujer’s clients to become more invested in the performance of their group.
The lending meeting is then followed by an hour of mandatory training, including a 20-minute microteaching session. This training enhances the professional and personal growth of each group member. Pro Mujer believes that the educational and hands-on training provides the women they serve with the tools to develop as successful business women. Training topics range from business planning and budgeting to empowerment and confidence building. Women learn to develop “Living Plans” which help them adapt to the stresses and complications of raising a family while operating a household and a business.
Argentina provides free public health care, but care is difficult to access outside of an emergency and typically involves long wait times. In addition, preventative care is virtually non-existent despite the high incidences of preventable diseases in women, such as diabetes, obesity, and cervical cancer.
Pro Mujer provides all members and their families with access to life-saving primary health care. This component is important as it provides security to families, alleviating the stress of worrying about their family's health care and allowing Pro Mujer members to focus on building their businesses.
Pro Mujer’s health care program offers a variety of services, including:
- Preventative and immediate health care, including health screenings with a nurse and follow-up with an onsite doctor
- Life and incapacity insurance to protect members and their families in the event of a critical illness
- Health and lifestyle educational training, including on topics such as nutrition and exercise
These services are conveniently offered at Pro Mujer Service Centers, which minimizes the time entrepreneurs are away from business activities. Pro Mujer charges a small service fee to all clients. For many of the women served by Pro Mujer, the health care dimension is one of the biggest draws to the organization.
The Argentinian government has begun to make changes to meet their goal to improve the economy and reduce the impact of high inflation. In addition, the government realizes the benefit (e.g. generating tax revenue) of easing the transition from the informal to formal economy. Pro Mujer in Argentina sees this as an opportunity to collaborate with the government and other organizations to help their members take their businesses to the next level.
Despite the challenges of operating in a complex context, clients of Pro Mujer in Argentina are building businesses and successfully managing their loans. The program is enriching their lives, allowing them to feel empowered, to provide for their families, to contribute to their communities and to set a powerful example for the next generation of business owners. We are proud that the partnership between Pro Mujer and DAMI is contributing to these important outcomes.