INTRODUCTION THE INTERVIEW PROFILES
STATISTICS BOARD OF DIRECTORS
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OW: You mentioned that there were side effects to empowering women which WOF had not foreseen. Could you tell us more about that?

S.C.: Any development program involves interventions in people's lives, and there are always side effects. One spectacular example of a negative side effect is a large dam construction program that ends up displacing the poorest of the poor, thus making them poorer, and leaving the less poor better off.

I like microlending because it essentially allows women to increase their income and then decide what further interventions to pursue, such as investing in education, housing, health, etc.

Nevertheless, even with our program there will be side effects, and it's up to us to be as alert to them as possible. When it comes to empowerment, there are some people who fear that giving women power means taking it away from men. Some of our clients' husbands become fearful of our program because it means changes in how the household is run. There is a fear that women will become self- sufficient and not need their husbands any more, and that the family structure will be upset.

I know that a number of women report their husbands don't beat them any more since they've started their businesses. These women used to be seen as "liabilities" and now they're seen as "assets." In some cases the husbands actually get involved in their wives' businesses, and the marriage is really strengthened.

Yet we know there are studies that show that one result of a program like this is that there can be an increase in domestic violence if the husband is fearful of his wife's participation. We watch carefully to see if that occurs. And, since we have a goal of strengthening the family through our program, we try to account for these kinds of issues by finding ways to involve the husbands.

OW: What is the average success of the businesses started with WOF funds?

S.C.: It's hard to measure profits since poor women who are just getting started often don't separate their business expenses from their household expenses. Nevertheless, we have a few studies that point to pretty phenomenal business success leading to increased income. Our program in Arzamas, Russia, reports that over the course of a year of increasing loan amounts, women increased their income by an average of five times. Another program in India reported a 52% increase in income.

Not all results are as striking as these, but at the very least we know that women are able to earn enough to pay off their loans with interest and to save a minimum of 10% and often more. At worst they are doing 10% better, and we figure most women usually increase their income by 20% fairly immediately. There are a number of reasons we see an immediate increase. For instance, if a woman has been getting credit from a loan shark who charges, for instance, 300% annualized interest, by getting a market interest rate that might be 25% annualized, she is automatically increasing her profits. Or she may now have the ability to purchase goods at wholesale prices or buy a larger volume. For example, one woman needed firewood to make tortillas over a wood fire, and by buying a whole truckload of firewood instead of one bundle at a time, she was able to make an enormous savings.

Frankly, we are trying to target the lowest level of poverty we can, and at that level, I am not as concerned about developing a business as I am about helping a woman to increase her income. If she can go from one dollar to two dollars a day, she's still poor, but at least she now has money to feed her children better, and to buy them shoes so they can go to school, and to take them to the clinic if they get sick. I really think the strongest impact we are making is in breaking the cycle of poverty for the next generation.

Of course, some women do take off dramatically with a small loan, and we are delighted when that happens. That's why our loans are programmed like a line of credit. We start with the small initial loan and a short loan term, such as four months, and then give increasing repeat loans as women's confidence and business experience increase.

For example, a woman named Dilia in Guatemala invested her first loan in chickens. She did well for a couple of loan cycles, but then her chickens all came down with a disease and died. For her next loan, she invested in pigs. They were not as problematic in terms of disease, but she discovered that the turnover time was too long and the profit margin was steady but not great. So with her next loan she invested in both chickens and pigs. In a little over two years, by receiving ever increasing loans and by learning as she went, she had developed a nice business. She also was ready to diversify into new businesses, which has been key to the success of many of our clients who live in very unstable situations.

OW: There are people who are likely to be skeptical that such a small amount of money would have long term positive effects in the lives of these women and their communities. The media often portrays poor people in third world countries overruled and stepped on by unstable and corrupt government officials. What would you tell them, briefly, from your WOF field experience to challenge their skeptisism?

S.C.: The greatest experience of my life was working for a year and a half in El Salvador and watching week after week as a poor woman received a loan as small as $50 and began to transform the lives of herself and her five children. Every week I would see new signs of hope: electricity installed for the first time, or a new piece of equipment for the business, or a leak repaired in the roof, or a child who was attending school for the first time. It amazed me that all that could happen from such a small loan.

I think one of the secrets is that these women all have dreams and ideas of how they could improve their lives, yet they lack opportunity. Once they receive a loan, something powerful happens. Not only are they able to invest financially in a business or some kind of income- earning activity, but they also unlock their hopes and dreams. For the first time they have a way to direct their pent-up energy. The power of hope can't be underestimated. One woman in Bogota, Rosalba, said "For the first time I feel useful. I realize I can do it." The increase in self-esteem and self-confidence can be as powerful as the increase in income.

OW: In your opinion are private foundations more efficient than government ones?

S.C.: We have some government funding that has been important to us in helping us build institutions and the like. Yet governments are often under such scrutiny, at least in the US where taxpayers are always questioning how their taxes are being spent, that it is hard for a government to take a risk. And the larger the organization, the harder it is to fund a small program.

That's why, in addition to private foundations, we count heavily on private individuals. The US has a heritage of private philanthropy and volunteerism that is unique in the world. We are blessed with a tradition of charitable giving that is pretty extraordinary.

One example is our ground breaking program in Arzamas, Russia. A group of private citizens from Columbus, Ohio, raised $20,000 to start a pilot project in Arzamas.

The early days in the Arzamas program were really rough. It was the first program to give working capital ruble-based loans in Russia, and there was not even a legal structure under which the program could operate. The program experienced all kinds of delays as the Russian staff worked hard to find a legal way to operate. For about a year, we kept telling our private donors, "they're working on it, but there are no loans out yet." Our private donors were well informed of the situation and understood.

A government agency, however, would not have had that luxury of such flexibility. They are under severe pressure to "perform," and it's hard for them to justify such delays. We feel this program would never have happened were it not for a few private donors who were willing to take a risk.

Yet now that the program is under way, it has attracted the attention of both practitioners and funders from all over the world. The World Bank has just given it a grant, and the U.S. Agency for International Development is currently considering a proposal for expansion and replication. We believe this small grassroots program will in fact become a model that is replicated in Russia and throughout Central Europe. We're really grateful for visionary private funders who make this kind of program possible.

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