When Access to Finance Means the Difference Between Life and Death

> Posted by Lisa Kuhn Fraioli, Independent Consultant

When Meri was first interviewed by Freedom from Hunger for its impact stories research in 2008, she was a classic microfinance success story. This hard-working mother of five from Huancayo, Peru had a successful business buying grains in the local market, milling them, and processing them into a type of custard that she then sold in Lima at a good price. The loans that Meri received from her local microfinance organization allowed her to buy more grain, invest in new products, and transport them for sale in Lima. The loans had helped Meri grow her business beyond the subsistence level for the first time. She now had a profit that she invested in food, healthcare, and education for her children.

When interviewers returned to Meri in 2011, the story had turned into a tale of desperation and distress. Now, Meri says, “I try to sell underwear and socks, but it almost never goes well. We are hungry. Sometimes there isn’t enough food. It’s very rare that we buy meat, and what I prepare, I give to my daughters and hope that my husband brings something to eat.” She is no longer able to send all her children to school. What happened to Meri?

After the birth of her fifth child, Meri suffered an internal hemorrhage and was hospitalized. The doctor warned her that her condition was very delicate and that she could no longer make the eight-hour trip to Lima to sell her products. Unable to travel, she reluctantly shut her business down. Meri’s family’s sole source of income was now the few soles that her husband brought in as a shoeshine. Meri owes the hospital for her emergency treatment and used money from her business loan to help pay for it. Then she borrowed from a bank, the municipality, and two more microfinance organizations. Meri can’t find any new business that gives her stable income. Meanwhile, her debts weigh upon her heavily. She is still in pain, but she can’t afford the 15 dollars it would cost for an ultrasound. She says, “It seems that the stress is accumulating in my stomach. Every day it hurts me as if the anxiety were taking away my potential.” Meri, overdebted with no means to repay her loans, is now effectively excluded from the financial system as a poor credit risk. She is still struggling to get back to the economic position she was in 10 years ago. She needs to develop a new business, one less dependent on traveling, but she will have to do so without any help from microfinance.

Access to finance might have saved Meri’s life by allowing her to get emergency medical treatment, but it also left her hopelessly indebted at a time when her capacity to pay was at its lowest. Unfortunately, Meri’s story is not unique among microfinance clients. Illness is one of the most frequently cited reasons for default. For example, in a 2009 study by CRECER, a large MFI in Bolivia, 46 percent of clients who were in default cited illness as the reason. According to the World Bank study “Dying for Change” (2002), “Of the 15 causes of a downward slide into poverty mentioned by interviewees, [illness] was the most frequently mentioned—ahead of losing a job, which took second place.”

Although adverse health events affect both women and men, women, as primary caregivers, are particularly vulnerable to income interruption due to health problems. A self-employed woman will usually need to close up her business not only when she is sick or injured but also when her husband or especially her children are ill so that she can care for them. In addition, women bear the very significant health risks of child-bearing and reproductive health complications (1 in 42 lifetime risk of dying during childbirth for African women). It is well documented that women have less access to health care than men and are likely to seek care for their husbands or children before themselves. As noted in the same World Bank report, in many cultures, women do not have the power to make financial decisions related to health spending and must get permission and money from their husbands to seek care at a hospital or clinic.

Microfinance organizations have a tremendous opportunity to provide women with financial tools and information to help manage these health problems, reducing the length and severity of health shocks, and empowering women to make financial decisions about seeking health care. In fact, Meri’s former MFI is working on developing a health insurance product that should help make prevention and treatment more affordable for other women.

Many organizations are providing health loans, health savings, hospitalization insurance, disability insurance, pre-paid health plans, income replacement insurance, catastrophic illness insurance, and other financial services specifically tailored to helping women manage these risks. RCPB in Burkina Faso, for example, provides health savings accounts. Clients who save at least six months in these special accounts are eligible for health loans in the event that their savings are not enough. CRECER in Bolivia organizes providers to provide preventive health screenings and referrals in rural communities. CRECER facilitates group loans to make sure women have the cash to pay for the preventative services as well as individual loans to help clients afford treatment. Having money set aside in their names or access to a loan gives women the opportunity to use their own judgment to seek timely medical treatment.

Some policies and products that are not health specific can also help stop the downward spiral. Flexibility is key. Credit policies that allow for restructuring or forbearance during times of crisis or emergency loans with a grace period can be of tremendous help to women like Meri.

You can find more about products and services that can help reduce the vulnerability of women, including research and product guides on Freedom from Hunger’s website, here.

Lisa Kuhn Fraioli is an independent consultant with 15 years’ experience in microfinance, social business strategies, evaluation, and product and program design for women and the most vulnerable. Until recently she served as Vice President, Latin America for Freedom from Hunger where she oversaw Freedom from Hunger’s programs throughout Latin America and the Caribbean as well as all youth, financial inclusion, research and social performance work globally. Prior to joining Freedom from Hunger she worked with Opportunity International as a Microlending Manager and Gender Advisor among other roles. 

Image credit: Social Enterprise Buzz

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