GLAM/Case studies/Enhancing the Financial Wellbeing of Women

A. Introduction

Within international law, human beings have basic rights that must be ensured. These include the right to work, education, adequate housing, and clean water. Differences exist in how rights are realized. Economic rights are only to be “progressively realized” due to varying state resources. However, international law recognizes the interdependency and indivisibility of human rights. Access to education and work and assurance of security necessarily requires access to clean water. Many individuals are denied access to clean water because of a lack of economic means. Inadequate access to clean water disproportionately impacts women. Women are prone to attacks on water routes. Women are denied the opportunity to education and politics because of the time it takes to collect water. The question then becomes what tool can be used to ensure that individuals are receiving access to clean water. One solution is microfinancing. This paper highlights the importance of microfinancing as a tool to progressively realize human rights, specifically the right to adequate water. Human rights are interconnected and interdependent. The right to water can lead to the realization of other rights such as education. Therefore, microfinancing can be used as a catalyst to acquire other human rights. This paper will also demonstrate how micro financing can be monitored, making it a very effective and practical tool. Lastly, this paper will end with case examples of Croatia and India to demonstrate when and how microfinancing should be applied.

B. The details of microfinancing

Microfinancing is the practice of providing small loans, at times less than one hundred dollars, without collateral such as houses or cars, and may not even require one to have a credit history. Institutions that provide micro financing can be nonprofit organizations, credit unions, cooperatives, private commercial banks, and non-bank financial institutions. It is the concept of lending out money without legally binding contracts because many of the borrowers are illiterate. This increases access to credit to the sectors of the population that are most vulnerable. In particular, the concept was geared toward ensuring that women had access to credit. Muhammad Yuns is a Bangladeshi economist who started the first microfinancing initiative when he opened Grameen Bank in Bangladesh which led him to be awarded the Nobel Peace Prize in 2006. Yuns believed that “credit should be accepted as a human right.” The bank has served over nine million people. The finances gathered are typically used for business ideas, family emergencies, and mobility in job transitioning. Before approaching the loan amount a committee observes the applicants’ motivation, competence, experience, and the project’s viability and repayment capacity. Some countries also have developed a system in which to highlight bad borrowers. Furthermore, while no physical collateral is used, “social collateral” is sometimes present. Social collateral includes self-help groups in which every member of the group guarantees the payment of a member’s loan amount. Grameen Bank loans require women to form these groups. Many Microfinancing Institutions (MFIs) receive funding from grants, subsidies, customer deposits, their own capital, partner banks, and public and private investors. Lenders protect their interest by issuing loans of different credit qualities preventing their portfolios from being drained when one or two loan amounts default. Microfinancing is used in developing as well as developed countries. Developed countries may choose to provide microfinancing to those who have bad credit scores or wish to take a loan that is below the minimum amount required by a traditional bank. The program specifically targets women, who comprise ninety-seven percent of loans approved. On average, women have a higher repayment rate than men with a ninety-eight repayment rate at Grameen Bank. Families also benefit more when women had control over the finances as it leads to higher education levels for female children and child nutrition improvements. Providing microfinancing to women not only helps an individual but also enhances the country as a whole. The World Bank estimated that the agricultural outputs of Africa would increase by six to twenty percent if women had access to financial resources. Microfinancing has impacted many women around the world, including Jane. Jane utilized her microfinance loan to start a sewing business, providing her children with access to education and pulling herself out of prostitution. Jane is just one of the millions of women whose life changed because of microfinancing.

C. Microfinance as a tool for realizing economic, social, and cultural human rights

Many international conventions and other instruments highlight the right to economic achievement. Article 25 of the Universal Declaration on Human Rights (UDHR) states that everyone has the right to work for and fair wage and to have a reasonable standard of living. Article 11 of the International Covenant on Economic, Social, and Cultural Rights (ICESCR) also identifies the right to an “adequate standard of living” while article 12 states that one has the right to the “highest attainable standard of physical and mental health.” The ICESCR specifically addresses economic rights and is crucial to the financial improvements of individuals. Unlike other treaties, the convention recognizes that economic rights take time to develop and allow states to achieve these rights “progressively.”

Microfinancing may be used as a tool for states to ensure that economic and non-economic rights are being realized.  The benefits of microfinancing have been mentioned by the Millennium Development Goals (MDG) and have been recognized by the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) committee.  Furthermore, the more updated Sustainable Development Goals (SDG) have also highlighted that women today still face problems in gaining access to credit.   Microfinancing can act as a tool to aid in the progressive realization of economic, social, and cultural rights and directly adheres to the goals of the SDG in providing access to credit. 

I. Progressive realization of economic, social, and cultural rights

Article 2(1) of the ICESCR requires a State “to take steps…to the maximum of its available resources with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means... The United Nations Committee on Economic, Social, and Cultural Rights (UNCESCR) recognizes that full realization of rights will not be able to occur within a short period of time. This language takes practicable accountability of states and their resources, but leaves open the possibility of states disregarding their responsibilities towards the realization of the provisions in the ICESCR. When considering what constitutes “available resources” the African Court on Human Rights has noted that what is considered is (1) the allocation of responsibilities and functions (2) whether the program is a systematic response to pressing needs and (3) the state is actively seeking to combat these difficulties. Furthermore, a program that does not include a substantial part of the population cannot be deemed appropriate. However, the covenant does recognize that rights that can be recognized immediately should be implemented without delay. The downside to the ICESCR is that there is no mechanism to allow individuals to bring complaints; only the Optional Protocol to the ICESCR contains such a procedure that not all parties to the convention have ratified. The UNCESCR General Comment No. 9 sheds some light on what “all appropriate means entails. The Committee has stated that a record should be kept of items that have proved to be effective in the past in the protection of human rights and if a particular state wishes to deviate from the original standard it must prove a compelling interest to do so. Furthermore, “accessibility should be progressively facilitated: legal, admin, operational and financial hurdles should be examined and where possible, lowered over time.” Additionally, the treaty does not make the application of legislative laws mandatory. However, it is highly recommended to do so as “judicial remedies for violations are essential.” As the court in Grootbroom mentions, states are required to do everything within their resources to overcome financial burdens. Based on General Comment No. 9, states have at least an obligation to evaluate various implementation techniques. One of these implementation techniques that states evaluate should be microfinancing. Microfinancing is a tool that can be used to realize the right to work and the right to an adequate standard of living as mandated by the ICESCR. Microfinancing allows individuals to become self-employed, thereby directly providing them with a job. Microfinancing has also provided for basic necessities such as water. Furthermore, many other economic strategies such as the privatization of human necessities such as water have proved to be ineffective.

II. Microfinancing used in the international human rights community

It has been argued that states may have legal obligations to pursue MDG. MDGs are official commitments because they have been taken on by the United Nations member states. The target of MDGs is to decrease poverty. “Key factors contributing to the success of such projects, especially ones designed with women in mind, include savings in time, realistic opportunities for learning, increased income levels, the empowerment of women, and project sustainability.” All of these factors of the MDGs can greatly be obtained through the use of microfinancing. The SDG has also stated that women today still face problems in gaining access to credit. As a result, women are less likely to adapt well to climatic changes. Microfinancing would allow women direct access to credit. The CEDAW committee has also mentioned microfinancing in its committee reports. The CEDAW states that women are to have equal rights to employment, healthcare, and education. Like the ICESCR, individuals can only bring complaints under the treaty if they have ratified the Optional Protocol to CEDAW. Many countries have not, including India. The convention also states that steps should be taken to eliminate gender stereotyping and enforce women’s reproductive rights. Initiatives such as micro financing are needed to elevate gender stereotyping of women as belonging only in the home. The CEDAW is not only subjected to states but international bodies have also affirmed that nonstate actors must respect human rights. Microfinancing would not be effective without the legal framework the CEDAW provides. Article 13 of the CEDAW convention states that States Parties shall take all appropriate measures to eliminate discrimination against women in other areas of economic and social life in order to ensure, on a basis of equality of men and women, the same rights, in particular: (a) The right to family benefits. (b) The right to bank loans, mortgages, and other forms of financial credit Article 4 of CEDAW further commands that “temporary special measures” may be used to alleviate prior discrimination against women. General comment No. 5 of CEDAW Committee encouraged state parties “to make more use of temporary special measures such as positive action, preferential treatment, or quota system to advance women’s integration into education, the economy, politics, and employment.” These measures can only be used, however, if they are “shown to be necessary and appropriate in order to accelerate the achievement of the overall, or a specific goal of, women’s de facto or substantive equality.” In the past, women have faced discrimination by banks or other lending institutions. The question then begs, can microfinancing be used as a temporary special measure to eliminate economic discrimination between men and women? The CEDAW committee would likely think so.

III. The CEDAW committee reports and how to measure credit approval programs

In 2010, the CEDAW committee noted measures to reduce poverty by states include promoting “access to credit by women,” acknowledging that women still lack access in many regions of the world. The committee is particularly worried about women in rural areas and their access to economic opportunities. Furthermore, the CEDAW committee reports have evaluated whether or not a state has engaged in microfinancing activity. For example, in its 2011 report, the CEDAW committee recommended that Paraguay implement various techniques to increase women’s economic level, including micro-financing. In the CEDAW committee’s fifth periodic report of Liechtenstein, the committee noted that Liechtenstein women's empowerment efforts were achieved through various means including micro-financing. In 2017, the CEDAW Committee’s report for Rwanda noted that inequalities of access to bank loans can be improved through the use of microfinancing schemes and the use of cooperative Banks. There are various ways to measure the progressive realization of economic rights. One such way is highlighted by the CEDAW committee report of Croatia. Croatia’s report analyzes the percentage of women gaining an approved loan amount compared to the percentage of women interested in gaining a loan. Croatia’s report notes that on average women receive loans twenty percent less of the time than men. The reports indicate that from the number of women that attend seminars and use consultations, there is a thirty to fifty percent increase in women who are interested in acquiring such loans. The report then separates statistics by each business center which totals nine, and the type of loan granted. This type of monitoring is necessary because each financial institution is individually scrutinized. This is critical because it is only these financial institutions that approve or disapprove loans granted to women. Croatia’s loan monitoring system can be applied to that of microfinancing loans. To be an effective tool for the realization of progressive rights, the tool must be measurable. Croatia’s committee report demonstrates that microloans can in fact be measurable.

D. Interdependency of Human Rights

Human rights cannot be analyzed and applied in a vacuum. All rights are interconnected. For example, article 26 of the UDHR states “[e]ducation shall be directed to the full development of the human personality and to the strengthening of respect for human rights and fundamental freedoms.” The UDHR makes clear that there is no hierarchy in regards to which human rights are to be treated and lists both civil and political rights and economic and social rights as being equal to one another. The UDHR was passed and accepted by the General Assembly of the UN, and was originally planned to be implemented as a treaty. However, it was then decided to make two separate treaties instead- the ICCPR and the ICESCR. This was because civil and political rights can more easily be monitored and immediately applicable as it mainly required states to non-interference with individuals. On the other hand, economic rights may not be always immediately realized and require budgetary requirements and legislation that are different for every State. However, the UDHR has been accepted as customary international law. Therefore, the interdependence of human rights is still very much applicable. Furthermore, this concept is solidified by multiple General Assembly resolutions. “All human rights are universal, interdependent, and interrelated. The international community must treat human rights globally in a fair and equitable manner, on equal terms, and with the same emphasis.” Fact Sheet No.16 (Rev.1), of The ICESCR, has stated that all human rights are both indivisible and interdependent. The document explicitly considers the interconnectedness, particularly between the UDHR, ICCPR, and ICESCR, and highlights the necessity of realizing women’s rights through the interconnectedness of all human rights. In regards to microfinancing, access to water necessarily requires the right to economic stability which microfinancing may be able to be used as a tool to obtain.

I. Access to Water There are approximately 2.2 billion people in the world that do not have access to potable water. Of these individuals, eighty percent come from rural backgrounds and have little if any access to the political process. This lack of clean water results in a tremendous outbreak of diseases indirectly limiting educational opportunities for children. Women are the primary collectors of water and as a result, are disproportionately affected by the lack of access to clean water. Often times young women travel extensive distances to fetch water, thereby foregoing opportunities of educational, self, and political development. Furthermore, women are more prone to be sexually harassed on these routes to water. Additionally, the lack of clean water restrains many women from privately using a toilet. The UNCESCR General Comment No. 4 declares that states must not only provide resources to individuals but must also ensure the availability, accessibility, acceptability, and adaptability of those resources. For example, in its general comment, the committee stated that simply the right to housing is not enough- the right to adequate housing must be given to individuals. This includes providing the right to basic necessities such as clean drinking water. Furthermore, the right to housing or water should be accessible to all, meaning that the state should ensure that the populations most disadvantaged and vulnerable are given access to their rights. States have an obligation to fulfill and in the context of progressive realization, states have the obligation to ensure they are making progress toward the full realization of a right such as the right to clean water. States are not obligated to maintain a certain, specific level of clean water access provided or a percentage of poverty reduction, but they are obligated to create quantifiable, time-bound objectives. While the ICESCR acknowledges that economic rights take time to bring to fruition, states have an obligation to immediately enact policies and plans that will ensure this progressive right is being realized with benchmarks to be achieved. The obligation to fulfill necessarily includes the obligations to facilitate, provide, and promote. Facilitation requires states to take “positive measures” in ensuring that a certain right is realized by assisting individuals to gain access to a right. In regards to access to water, UNCESCR General Comment 15 highlights ways in which states can provide such access. These include acts done through legislation, adopting a national water strategy plan, ensuring rights are affordable for everyone and facilitating improved and sustainable access to water. The range of measures that may be used includes low-cost techniques and technologies, appropriate pricing policies such as free or low-cost water, and income supplements. Framework laws are to be set to also ensure a meta right is being enforced. Meta rights are rights that an individual has ensuring that a state is continuing to improve the rights that are given. Frameworks for policy implementation should include benchmarks or targets, remedies, and monitoring mechanisms. One solution that was tested and failed in many regions was to privatize the water system. a. Problems with corporate privatization There are a number of downfalls to the privatization of water systems by big conglomerate companies. In 2000, the Bolivian government handed over its water systems responsibilities to a private company known as Aguas del Tunari. As a result, as much as thirty percent of an income an individual was solely used to pay the high clean water fees and forty individuals in Cochabamba were left with no access to water at all. Outraged, the public was backlashed, and the Bolivian government terminated the contract with Aguas. The World Bank has also funded operations in India to no avail. The Indian government reported that not only could those in need not afford the prices placed by water-supplying companies, but they had to pay twenty-five thousand dollars per month for the salary of the workers of the water companies. In 2001, the World Bank funded approximately $556 million dollars to fund the Irrigated Agriculture Modernization and Water Bodies Restoration and Management (IAMWARM) Project. Farmers in India, whom the program was supposed to aid, were outraged by the mismanagement of the project which led to faulty tanks being implemented. Many farmers were not able to produce crops that year due to a lack of water. While implementing corporate privatization has not proven to be an effective tool in protecting the right to clean water, private capital is still needed. Particularly in developing countries, as the governments do not have the funds needed to establish clean water systems. With a well-grounded economic strategy, funding sought by municipal water utilities themselves could potentially result in better access to water. For example, corporations typically have only a short-term profit mentality, and therefore, will expect a higher rate of return per year around twenty to thrifty percent. By contrast, municipalities may seek funding from financers with a more long-term approach that will only expect five to six percent of returns per year. When this type of partnership was implemented in Savelugu, Ghana, only fifteen percent of the amount of clean water went unaccounted for compared to previous statistics of fifty percent. Savelugu was able to show these results because the town implemented rules to control the management of clean water. Microfinancing can be used as a tool to obtain this type of financing, avoiding the shortcomings of the privatization of water systems to big conglomerate companies. b. Micro Financing as a Solution History has shown that to realize many rights such as access to water the government must step in when the private sector will or cannot. For example, in the 1930s, when only ten percent of the rural population had access to electricity when the majority of individuals in urban areas had such access, president Roosevelt was compelled to initiate the Rural Electrification Administration (REA), declaring electricity “a modern necessity.” Acts such as the Tennessee Valley Act (TVA) allowed rural areas to take loans from the federal government in order to gather the funds necessary to have access to electricity. In 1939, twenty-five percent of individuals in rural areas had access to electricity, and ninety percent in 1953. Even more significant is that these rural areas spiked the demand for electricity, as farmers required more electricity and began purchasing more electronic equipment, increasing the local economy. The Electric Home and Farm Authority (EHFA) was also established, allowing individuals to buy appliances on credit through low-interest loans. The default on loans has been less than one percent since the implementation of the REA. Due to these efforts, the number of businesses and consumers of electricity grew rapidly. One can live without electricity, but one cannot live without water. The same logic behind the development of REA can be applied to microfinancing used to supply access to clean water. By securing financing from governments, banks, nonprofit organizations, etc., the world’s most vulnerable can have access to water so long as financing does not come with high-interest rates and a short-term view of profits as was the case in the privatization of water systems. Furthermore, it would be critical that local community members oversee the management of such operations. Big conglomerate businesses lack the knowledge and care behind the operations of the water system in specific regions. This was seen in Savelugu, Ghana as mismanagement of the water supply led to half of the available, clean water going to waste. Microfinancing allows the people within those cities and towns themselves to have control over the whereabouts of clean water, so it may be given to people dying of dehydration rather than going down the drain. Providing access to clean water is a vital catalyst for other human rights. International community bodies have continuously stated that rights are interconnected. The right to education automatically requires the right to adequate housing, water, and food. Microfinancing can be implemented as a crucial tool to ensure that these rights are being realized. E. An analysis of Croatia’s microfinancing operations under internal law

MFIs have effectively been rendered obsolete in Croatia due to legal barriers. For example, a potential MFI could not externally borrow money. There is no guarantee from a bank that they will cover defaults on debt and there can only be one county with an administrative unit even though Croatia has 21 counties. There are also no national or regional funds, nor a tax scheme dedicated to implementing microfinancing programs through individuals or organizations. International bodies have consistently held that in areas regarding finances, states are given a wide range of self-regulation. “In areas such as taxation or social security, a wide margin of appreciation is granted to the States parties.” Therefore, on its face, it would appear that microfinancing programs would not be enforced as a tool for the realization of economic rights. However, the analysis of two positions is to be considered. First, what are the statistics of those lacking human rights and what has the state done currently to ensure these human rights are being realized? Second, if microfinancing schemes were in place would there be resources to ensure that predatory lending would not occur? In Croatia, while there is no law that allows individuals and organizations to create microfinancing institutions, government programs do exist to provide funds to commercial banks in order to finance microbusinesses. Without the government’s assistance, banks would not engage in such lending because they are considered too risky. It has been reported that Croatia lacks in the number of inclusive entrepreneurship due to a lack of foundations to aid microenterprises in starting up and during business downfall and a lack of business education in schools. However, “publicly subsidized business development services are widely available to micro-entrepreneurs in Croatia.” In 2018, 18.3 percent of the Croatian population lived below the national poverty line which adopts EU standards that are set at “sixty percent of adult equivalized median disposable income after social transfers.” It is the amount of money an entire household has after paying taxes and after paying for access to goods and services. However, in 2017, only .6 percent of Croatians lived at the international poverty line, which encompasses those living on $1.90 per day. In 2020, World Bank acknowledges that since 2018 Croatia’s poverty levels will continue to rise due to COVID and the occurrence of one of the strongest earthquakes since 1880. Croatia’s CEDAW report indicated that the nation is focused on further promotion of drinking water for nutritional well-being. The report also highlights Croatia’s four-year Program of the Government of the Republic of Croatia which determines and monitors main areas of development, implementation measures, resources of funding, and monitorization of implementations. In particular, the Small Businesses Encouragement Act measures the amount of funding going to women. As mentioned before, Croatia’s committee report does an excellent job monitoring loan amounts that are approved for women. Given the extremely low amount of the population that is facing poverty as defined by the World Bank and Croatia’s efforts to fund microbusinesses, Croatia is an example of a type of country that international bodies would not analyze too carefully to implement microfinancing, because such lending is still being implemented. Furthermore, In Croatia, 99.6 percent of the population has access to clean drinking water. Many basic human rights are not lacking, including access to water.

F. An analysis of India’s microfinancing operations under internal law

While there is no law requiring the government to set up an MFI, India has passed the Microfinance Institution Bill of 2012 governs MFIs. Under this act, a MIF registered as NBFC-MFI is labeled as private sector lending which requires banks to “allocate a percentage of their portfolios to invest in specified priority sectors at concessional rates of interest.” This is crucial because avoids the problem of predatory lending in which banks or institutions will lend money at high-interest rates, resulting in many default loan payments. The law further requires that there is no loan collateral and no prepayment penalties. Public deposits may also be accepted by Cooperatives, but only from its members. The state of Andhra Pradesh has taken measures one step further enacting laws that give great “discretionary power to the registering authorities and imposes restrictions on collection practices.” Further protecting borrowers. The poverty line as defined by the World Bank in India was roughly thirty-three percent in 2004. Pre-COVID the percentage was less than 1.5 percent. However, sixty percent of “the population live on less than $3.10, the World Bank’s median poverty line.” Currently, ninety-one million people in India do not have access to safe drinking water. This number has substantially decreased since 2005, using microfinancing, particularly implemented by Water.org, creating access to water for over sixteen million people. India is a case example in which microfinancing would be strongly recommended under international law for two reasons. First, India’s poverty rate and those without access to water are vastly high. India’s CEDAW committee report continues to highlight that many individuals lack adequate access to water. Second, microfinancing has been shown to be an effective tool in the past in allowing individuals access to water. The UNESCR General Comment No. 9 has stated that nations should keep track of methods that have helped the nation reach their human rights obligations in the past. India has made substantial strides in reducing its poverty rate and the techniques that have proven to be effective need to continue to be implemented. The UNESCR General Comments also encourage efforts taken through legislation. India has good legislation in that it does not place many barriers to forming a microfinancing institution, unlike legislation in Croatia. However, national legislation could be improved by passing laws like those in the state of Andre Pradesh. This would further protect borrowers from predatory lending which would otherwise drive them into more poverty.

G. Conclusion

Microfinancing is a measurable and effective tool that can be used to ensure that rights are being progressively realized. It is an extraordinary tool because it allows multiple rights to be realized, as all rights are interconnected. Specifically, by utilizing microfinancing to gain access to water, more women are able to stop their journey to fetch water for hours and instead receive an education or engage in political means. To ensure economic rights are being progressively realized states are to actively seek ways to combat financial difficulties and record what implementation did and did not work. These obligations are imposed on States by the UNCESCR and international courts. Microfinancing is a tool that has been proven to be effective in many instantaneous over other implementations such as privatization in multiple countries including India. While there are no laws requiring microfinancing in Croatia, the government continues to provide microfinancing through its own measures, thereby aiding small businesses. Microfinancing is reputable, sustainable, and effective. A tool with so much potential to aid in the realization of many human rights cannot be turned a blind eye by the international community.