By Shaker Jarrar and Omar Fares
Illustrations by Rawand Issa
Translated by Paulina Keller
The original report was published by 7iber on July 2, 2019.
“Within the past five years, we’ve worked on promoting microfinance in Jordan. Today, I am proud to say that we have many world-class microfinance institutions in Jordan, enabling thousands of people to improve their lives with their own hands.” These are the words of Queen Rania, member of the FINCA International Development Organisation Board, at the world conference for finance companies in Washington in 2005.
Fourteen years after this speech, microfinance institutions have cast their anchors in Jordan. It has become possible, even more so important, to study changes they are responsible for, in societies that they are active in. Hereby we mainly consider poor societies, seeing as they are the main target of these institutions.
The community of Ghor as-Safi of the Jordan Valley, serves as a typical example for people that microfinance institutions seek to empower. In this small community, a lot of women who received microloans are caught in a complex web of financial commitments that have aggravated their poverty and made escaping from poverty even more difficult for them and their families. Some of these women have been described as being “Gharemat” – defaulters – after failing to repay their loans.
“Sometimes I don’t sleep at night, thinking what if they arrest one of the girls? Where will I get 1,000 JOD from? We are suffering. God shall not pardon those who invented microloans.” This is how Naima describes her situation, after having taken several microloans, with her female relatives as guarantors, and they all became “gharemat”.
The rise in the prominence of al-Gharemat has been connected to microfinance institutions. Discussion of their cause intensified last March, with the launch of a royal campaign aimed at paying off their debt payments under specific conditions; these included not to be a wanted debtor by law enforcement on sums exceeding a thousand Jordanian Dinar (JOD). Secondly, in order to benefit from this one-time campaign, it is required to provide evidence that the family’s property and their financial capability do not allow them to pay off the debt. Additionally, the Cabinet stipulated that the beneficiaries’ family monthly income may not exceed a total of 600 JOD. The number of beneficiaries of this campaign reached 5,974, and the total of voluntary donations reached approximately three million JOD.
However, public discussion around the issue of al-Gharemat has been limited to their defaults and inability to pay back the loans. Even though the ratio of default, according to the operators of the institutions themselves, appears to be natural when considering the standards of financial loaning institutions. Most of the official and public reactions took on forms of solidarity, portraying the debtors as the sole beneficiaries of this solidarity, and not the loaning institutions as well.
The results of this crisis were dealt with without explaining its causes, of how the women turned into debtors, and without addressing the finance institutions themselves and their philosophy of “fighting poverty and empowering women”. Added to that, was a clear lack of understanding of what it means to be a debtor and the reflection of that in the debtor’s life.
Based on wide research and field interviews, this article addresses the history of microfinance institutions in Jordan and the context in which they appeared. It attempts to question the claims of these institutions, through inspecting their work and impact of their loans on the community in Al-Ghor, Jordan Valley and its women, as it is considered a “poverty pocket” and an area of interest for a number of microfinancing institutions.
What do we know about Microfinance?
The idea of Microfinance/Microlending started in the 80’s, when the Bangladeshi economist Muhammad Yunus founded a bank aiming at serving the poor, known as “Grameen Bank”, meaning “The Bank of the Poor”. It offered very small loans, according to the needs of each borrower with a rising interest rate. Yunus portrayed microloans as a healing cure that would rapidly create an endless number of jobs, eliminating extreme poverty. USAID, the World Bank and other international institutions adopted Yunus’ model, whose bank was funded by international donors, mentions Milford Batman, one of the most important critics of microfinance institutions.
The year 1997 witnessed the first founding moment of microfinance, when the United Nations’ General Assembly issued their resolution 194/52. This resolution considered the microcredit system an important tool to help the poor, especially women, in all parts of the world. The conference then celebrated the significant contribution of microfinance to the “eradication of poverty, empowerment of women and social upliftment”, as the resolution indicated.
In the 90’s, parallel to the rise of microfinance in the world as one of the tools to fight poverty, the microfinance market started booming in Jordan. In 1998, the Ministry of Planning and International Corporation (MoPIC) collaborated with USAID, launching the “Achievement of Market-Friendly Initiative and Results” (AMIR) programme. This programme, with a budget of 40 million dollars, provided financial and technical support as well as advice to a group of microfinance institutions which were established in Jordan at the time. Among those institutions were Tamweelcom, owned by the Noor Al Hussein Foundation (NHF), the Ahli Microfinance Company (AMC), owned by the Ahli Bank, and the Middle East Micro Credit Company (MEMCC).
In the mid-2000s, this institutional type of borrowing was increasingly welcomed and seen as a ‘bottom-up’ development model. The institutions received extensive funding and support from several political and economic figures, including Bill and Hilary Clinton as well as Bill Gates. The United Nations referred to 2005 as “The Year of Microcredit”. The year before Yunus had been awarded the Nobel Peace Prize with the Grameen Bank.
Additionally in 2005, the Ministry of Planning and International Corporation (MoPIC) issued the National Strategy for Microfinance, which aimed at re-structuring the sector and directing it towards a more sustainable future. One of the strategy’s most important recommendations was to make the sector a private one and reduce government support and loans which the government had been providing in this field. Guided by the donors and led by USAID, this reduction was reflected in the governmental sector’s share of microfinance in the market, which came up to 60% of loans in 2003, reducing to 40% in 2011, presented by the Development and Employment Fund only. This coincided with a shift of the donors’ interest towards private microfinance institutions.
Until the mid-2000s, there were no special legislations regulating the work of microfinance companies. Most of them were under supervision of the Companies Control Department at the Ministry of Industry and Trade (MoIT). And, like all companies under the authority of this department, they submitted yearly reports regarding their activities as well as an annual audited financial statement. As for the microfinance activities of some commercial banks, they were supervised by the Central Bank, since commercial banks as financial institutions fall under the Central Bank. In 2009, according to the new Law of Associations, non-profit microfinance companies fell under the supervision of the Ministry of Social Development (MoSD). As for profitable microfinance companies, they were supervised by the Ministry of Industry and Trade (MoIT). Finally, banks offering microfinance services remained under the supervision of the Central Bank.
Having multiple entities manage microfinancing continued until 2014, when the Cabinet released a regulatory system for microfinance companies. The Central Bank became the main supervising entity of microfinance companies, regulating the relationship between companies, the government and the client. However, this system was not implemented until 2018, and according to it in this year, a group of companies represented by the Tanmeyah Association for Microfinance – established in 2009 were licensed. This association was established in 2009 for the representation of several microfinance companies. According to Muhammad Amayreh, director of the Financial Stability Department at the Central Bank, a total of 43 institutions operate in microfinance, nine of which have so far been licensed, represented by the Tanmeyah Association for Microfinance.
Fighting poverty and empowering women is supposedly the prior aim of microfinance institutions. However, literature and published papers by the nine institutions represented by the Tanmeyah Association are devoid of any study measuring to what extent this aim has been achieved. The executive director of Tanmeyah, Salim Al-Nimri, argues that the association is in the process of preparing a study to measure the social impact of the microfinance sector, after a study that was supposed to be conducted by a German company in 2015 faltered due to its high costs.
However, Al-Nimri believes there are indications of positive impacts these types of loans have on peoples’ lives. His impression is based on field visits, communicating with borrowers and getting to know their “success stories.” Al-Nimri has gotten to know several cases he shall not forget; one of them is a story of a young man who took a loan of 300 JOD and ended up owning a factory worth 90,000 JOD, as well as another borrower now owning a business worth one million JOD. He stresses the importance of success being linked to “right beginnings.”
The Al-Ghor community might be an ideal model for examining the extent to which microloans contribute to reaching such successes. We may hereby analyze the social dimensions of these loans, their direct impact on the community as a whole, and its women in particular, and finally, come to an understanding of how microloans operate in an impoverished community.
What do the poor take loans for?
Microloans are widespread in Ghor as-Safi among families with various social backgrounds. Women constitute the largest proportion of all borrowers. Daily-paid agricultural workers, university teachers, housewives, workers without university education that are on monthly wages and others resort to microfinance institutions on a regular basis. The first branch in Ghor as-Safi was opened in 2013, says Abu Zaid, director of a branch of one of the three microfinance institutions in the Jordan Valley, Al-Ghor.
Abu Zaid believes that the main goal of microloans is to encourage productive projects from which poor families can benefit, especially the female members of these families. “Up until this day, our concept is to fund your project so you stand on your own two feet. Our aim is to make you a capable person, a productive one, not just a consumer,” says Abu Zaid. But at the same time, these institutions offer other loans in addition to loans for production projects, such as loans for medical treatment, education, home improvement and others.
Umm Ali, a woman in her fifties who lives off her late husband’s retirement pension of 136 JOD from the Arab Potash Company, talks about the reasons that push women from Al-Ghor to resort to microfinance institutions. “There are women who take loans for doing up their houses like plaster, windows, doors and even for covering childbearing expenses. For example, my cushions don’t have covers, so I have to go and take 200 JOD to make some covers,” says Umm Ali. According to women we interviewed who are beneficiaries of microloans, most women borrow to maintain their houses, or to pay off debts or other loans, or even to pay accumulated electricity bills. Other women take out loans after giving birth in order to pay expenses or to buy clothes for their children on Eid.
Hence, the vast majority of microloans go towards consumption in Al-Ghor. They cover basic daily needs, and herewith contradict the productive aim loaning institutions strive to achieve, which is economic empowerment for people who don’t have the financial capacity to borrow from banks according to Abu Zeid. The lack of familial financial capacity and liquidity to cover their basic needs pushes thousands to turn to these institutions. They incur late fees as well as interest rates that drain their very limited income. All of this, to be able to live.
Abu Zeid argues that the problem does not lie in the loans themselves or how they operate in an impoverished society, but rather in the “culture” of the borrowers themselves; “Financial culture does not exist here. If someone has a bit of money, they do not start a project or develop in a specific field. The money is directed towards consumption immediately; I want to eat, I want to drink, and then I am back at zero … there is mismanagement, and at the same time, there is no organization of time and needs.”
Umm Ali and other women from Al-Ghor affirm that there is a noticeably increasing demand for microcredits in their communities. There is no precise percentage as to the amount of increase of borrowing in Al-Ghor, but Abu Zeid estimates an annual increase of about 3 to 4%. Institutions are working on achieving an increased annual rate of loan transfers. “Every year, the company sets an aspired growth rate it must achieve. In the southern Ghor, all branches achieve this rate. For example, in 2018 I aimed at 1.5% growth. Now in 2019, I will put the same percentage or I will increase it a little, 2.5% for example,” says Abu Zeid.
The institutions realise these growth rates by field visits to families, by which they aim to convince them of the need for loans or renewal of existing ones. Several consultants tried to convince Umm Ali to obtain a loan from their institutions. However, Umm Ali strongly refuses to deal with credit institutions, seeing as the retirement salary of her deceased husband is barely enough to secure the basics for her life. “[A consultant of one of the institutions] says to me, come Umm Ali, take a loan, redo the floor of your kitchen. I tell him that I can’t. He tells me come to us, bring your notebook and come, I say no, I can’t take it, my late husband’s salary is not enough. If I take a loan, how would I repay it? And then what, are you going to call the police?” says Umm Ali.
The main factor of why the ratio of borrowing is rising, lies in the ease of taking a loan in the first place. An unemployed woman can obtain a loan of 1,500 JOD for example, having herself and two non-working women as guarantors, or with three other women as guarantees. She may also take the same loan with the guarantee of two non-working women and a man who receives a monthly salary. The loan’s distribution among the person who takes it and the guarantors varies from case to case. Sometimes the borrower receives the total amount of the loan with her commitment to repay it, other times she may share the loan with her guarantors and they all repay it in monthly installments. In other cases, the guarantor takes a limited amount from the borrower and repays it without interest rates.
Driven by need
Jamila (28) and Salam (29) are two sisters who work in agriculture on daily wages. Five years ago, along with one other woman, they became guarantors of a loan their relative Naima (26) took from the National Microfinance Bank. Her three-month-old daughter needed an MRI, costing 315 JOD. The total amount of the loan was 1,200 JOD, of which 700 were for Naima, 200 for Jamila, so that her husband could fix the bus he was working on and Salaam got 100 to buy Eid clothes for her younger sister. The other guarantor took 200 JOD.
Seven months after taking the loan, a bank employee knocked on Salam’s door to her surprise, asking for the monthly loan repayment of 87 JOD. Naima had stopped repaying the loan, however Salam had returned the 100 JOD she borrowed from Naima. Jamila’s husband had too paid the 200 JOD to Naima in installments, each monthly payment amounting to 15 JOD.
Jamila divorced her husband and now lives with her two daughters and sister Salam, five brothers, her mother, her father and her father’s three wives. For three years, Jamila and Salam have been wanted by law enforcement because Naima has stopped making her loan payments. This often presents difficulties to them in moving around comfortably. “I can’t perform Umrah, nor can I go to Aqaba or Amman,” says Salam, who lost a position in the Agriculture Department, because she was unable to get hold of a non-conviction certificate.
Naima repaid 580 JOD of the money she borrowed and then stopped the monthly payments. “I tried so hard but I could not pay it. I worked a lot but I still couldn’t,” says Naima, who relies on a salary of 150 JOD from the National Aid Fund (NAF). She has two children and her husband is unemployed. Since 2014, Naima has been working on tomato farms all over Jordan; Al-Ghor, Al-Shoubak, Tafileh, Al-Quwirah and Ma’an. She often had to leave her house at one in the morning only to return in the afternoon the following day. “The way is around four hours from the Jordan Valley, Al-Ghor, we gather the workers and we leave the valley at around 2 am. Then we arrive there at around five or six in the morning and work. We finish at 12 or 1 mid-day and then I need another four hours to get home,” in order to get a daily wage of 7 JOD. Therefore, taking loans from microfinance companies forces Naima and other borrowers to increase their already-long working hours to secure monthly repayments for the loans.
The relationship between Naima and the rest of the guarantors worsened and the amount owed increased after they had stopped paying for years. Interest and late fees accumulated, so that the required amount to the bank reaches 1,035 JOD today. Jamila and Salaam refuse to pay for a loan they don’t have anything to do with. Additionally, they argue that they can’t afford any extra expenses on top of their daily living expenses. “I told her, I am a girl who works, God knows my situation, I can barely look after my mother and my little sisters,” says Salam.
Naima expresses strong remorse to have taken a loan, constantly worried about her guarantors being wanted by law enforcement. However, she stresses the strong need that pushed her to do so. “By God, there are times at night I don’t sleep because I worry. If they caught a girl from them, where would I collect 1,000 JOD from? We suffer from this, God will not forgive those who invented loans. “
However, Naima’s loan problem does not stop here. Rather, it becomes a living reality linked to her family, which makes life difficult for her.
The vicious cycle of loans
The story of Naima and her husband’s family demonstrates the reason for the remorse she feels. It serves as an example as to how she and other borrowers and their families are stuck in a complex net of installments, debts and late fees, difficult to get out of.
Naima and her husband Majid (33) live in the house of Majid’s parents, Samia (69) and Akram (72). Akram married Samia more than 40 years ago, and they have five sons and five daughters. Hussein, the eldest son, left the family home after he married Hamda. The five daughters left the house after they got married. Today, four sons and their wives and children live in the family home as well as their parents Samia and Akram. Most of them have taken microloans more than once since 2013, either from banks or microfinance institutions.
Akram has taken out three consecutive loans from the Islamic Bank. The first one of 8,000 JOD in 2013 was to secure the marriage costs of his son Majid to Naima. He repaid it with monthly installments of 173 JOD. In the following year, he borrowed the same amount to cover the marriage costs of his son Ismail (28) and his wife-to-be Aseel (24), which he repaid with monthly installments of 180 JOD. In 2015, he borrowed 6,000 JOD in order to marry his son Mahmoud (25) to Yasmine (24), which he is still repaying with a monthly installment of 133 JOD. In July 2018, Akram took out another loan of 5,000 JOD from the Agricultural Credit Corporation, to help out his daughter. 88 JOD are deducted monthly from his pension to repay this loan, whereby he relies on two retirement salaries; one from the army and the other from Potash Company, coming to a total of about 600 JOD.
As for Samia, her loan journey started in 2013, the year in which Akram took the first of his loans to marry off their first son. Samia borrowed 900 JOD from the Microfund for Women, to start a business selling cleaning materials from home. Naima, Sumaya (one of her relatives) and herself were the guarantors.The loan was granted after the Fund had confirmed the business was real, as one of its employees ensured during a field detection.The business failed after three months due to most customers invoking to pay delayed and often then did not pay at all. “[The project] stopped. It’s all debts with the Ghor women here, and they don’t repay. I stopped it and I said I don’t want to do anything,” says Samia.
In 2015, two months before Samia finished repaying her loan, she rescheduled the repayment to the Microfund for Women. She borrowed another 1,200 JOD to install doors and windows in her house. The loan was taken with Naima, Yasmine and Sumaya, without the Fund making sure whether the project still existed. Two years later, Samia deferred the payment again. She and her neighbour Aseel borrowed 1,500 JOD with Aseel, Yasmine, and Sumaya as guarantors. A few months later, the neighbor died, so they dropped part of the loan from her.
Two months before Samia finished repaying the loan, Yasmine postponed the payment of the loan by borrowing the same amount with the guarantee of herself, Aseel and Hamda. This loan was taken in order to rent a piece of land which Hussein, Hamda’s husband, wanted to cultivate. In the first months of last year, Yasmine borrowed 1,000 JOD from Tamweelcom so that Hussein could purchase agricultural products and materials for the land he rented. In that same period, Yasmine took out a loan of 1,000 JOD from the National Microfinance Bank. to pay accumulated electricity bills amounting to 800 JOD, and 250 JOD of water bills. The monthly installment of this loan came to a total of 69 JOD, paid by Mahmoud, Majid and Ismail, each responsible for 23 JOD.
Last April, they paid the last installment of the loan, however the electricity bills were piling up again. The family had not paid the bills for over six months while repaying the loan they took out. “What can we do? We need to renew the loan in order to pay for electricity before they cut it off in the summer,” says Yasmine.
Last February, Saed, Akram’s son, borrowed 1,000 JOD from the National Microfinance Bank. and 8,000 from the Agricultural Credit Corporation to pay for his wedding. After Saed’s wedding last March, Akram’s debts came to a total of 1,000 JOD, as he paid part of Saed’s wedding expenses. Naima applied for a loan from the National Microfinance Bank, granting her 500 JOD, then she lent it to Akram to pay off half of his debt.
This complex story illustrates how loan payments, their interest rates and late fees deplete a big part of borrowers’ salaries in the Jordan Valley, Al-Ghor, that are meager in the first place. Resorting to consumer loans highlights the contradiction of reality with the desired goal of microlending, which is to achieve a productivity that leads to “economic empowerment”. These loans now take from the share of basic needs such as education, medical treatment, food and drinks, as well as pensions that have lost their purpose to provide safety and comfort to the elderly after years of work.
Borrowing to survive
Six JOD as a non-sustainable daily wage and a monthly food aid provided by Tkiyet Um Ali, is all that Umm Fadi, her husband and their three children depend on for their livelihood. The family lives in a small house consisting of the bare minimum essentials; two rooms with yellowing walls due to moisture and water leakage. Its monthly rent is 100 JOD.
Abu Fadi works on the Ghor farms for six JOD a day, and before that he worked on constructions as a freelancer in Al-Qatraneh. “I wait for my six JOD and I leave. Do six JOD pay the rent or pay for bread? Do they bring food? Pampers for the girl? Six lira bring what they bring”, says Abu Fadi. For the family to secure their basic needs which can’t be covered by those six JOD, Um Fadi turns to microloans.
Umm Fadi and her husband started resorting to loans three years ago. Abu Fadi was sentenced to court for not paying a debt of 500 JOD that he had owed since the time of his marriage. Umm Fadi took a loan of 500 JOD from Tamweelcom to pay this debt. Eight months later, Umm Fadi renewed the loan and borrowed another 1,000 JOD. With this loan she paid off accumulated debts to a shop and the house owner as well as late fees of the first loan.
Nine months after the second loan, Abu Fadi got arrested for not repaying the cost of the bedroom (1,400 JOD) that he had designed upon his marriage through debt. Umm Fadi then resorted to a third loan of 1,200 JOD from which she paid late fees for the second loan, 100 JOD for the monthly rent, and part of the bedroom debt. Thereafter, her husband was free to leave prison, pledging to pay the rest of the amount in monthly installments of 50 JOD, however, he was unable to do so. This led to the renewal of the case again, which left Abu Fadi and his wife in constant fear of getting arrested at any moment. “We could barely pay the third loan, because he was in prison for 90 days and I repaid it. Each one of my brothers and his helped me, and I worked on a day-labour basis to repay it.”
Thereafter, Umm Fadi applied to the Microfund for Women for a fourth loan of 1,400 JOD with her two neighbors. Umm Fadi was herself the guarantor. She received 200 JOD from the amount, agreeing to pay her neighbors 13 JOD monthly. However, they were late in paying the monthly installments to the Fund, which led to late fees for Umm Fadi that she had nothing to do with. She has not paid them until today. Because of this, both the Microfund for Women and Tamweelcom refuse to grant her further loans.
Due to this refusal, the couple applied to the National Microfinance Bank for a fifth loan in late 2018, to pay accumulated rent. “I begged him [the employee of Tamweelcom], gentleman, are you happy? The children want to go out, we need to pay our rent,” says Abu Fadi, who is now taking out a loan to pay the rent. “I live in a rented house (…) and the owner of this house tells me either you pay or you go (…) Where can I go with my family? So we are forced to apply for a loan to pay the rent.” The National Microfinance Bank granted Umm Fadi the loan of 1,400 JOD which she paid the accumulated rent with. However, she was unable to make the monthly payments. She pledged her husband’s sister’s ring, to pay the March installment, in exchange for 50 JOD, on the condition it was redeemed before June. Otherwise, the ring would become property of the jewler.
By this time, the rent had accumulated again, as the couple had not paid for it for four months and were unable to get new loans. “When I get a loan from the bank, I pay the rent, and return to the same issue. It’s the same thing, I took the loan and then I’m broke for three or four months, then I have to return to the bank, and the bank wants money from me (…) and here I am, unable to pay four months of rent,” says Abu Fadi, expressing his awareness of the vicious circle of loans and debts he is stuck in, unable to pay 100 JOD rent a month.
Investment in a broke community
Microcredit critics have questioned the ability of this form of lending to help the poor establish small enterprises that lift families out of their poverty. The prevailing belief among the promoters of microcredits was that the poor, especially women, could establish businesses to sell goods and services to other poor people in their community. As long as the poor could produce any commodity, they would be able to sell and market it.
Four years ago, Aisha (39) and her 40-year-old husband took a 15,000 JOD loan from the Development and Employment Fund to open a shawarma restaurant. In order to equip the restaurant somewhat, Aisha borrowed another 5,000 JOD from the National Microfinance Bank. With the money she bought a yoghurt refrigerator, a juice machine and other utilities.
After three months, the restaurant began to indicate its failure; expenses started accumulating, consuming its already meager revenue. Aisha and her husband stuck to the project and tried not to give up early. They rescheduled the payment to the National Microfinance Bank, after having paid most of it, in order to borrow another 5,000 JOD. With the money, they invested in air conditioners to protect the shawarma from summer heat and replaced old shawarma skewers with new ones.
However, this investment did not change the low demand for the business. The restaurant became a huge burden for Aisha and her husband. A year and a half after opening it, they decided to close it to avoid the high expenses that it was accumulating as long as it was open. “With the money we earn from our business we can barely afford to buy chicken. Sometimes we pay for chicken and meat through debt. The refrigerator company still wants money from us. Every month we pay them what we can”, says Aisha. Additionally, the owner of the restaurant claimed 14 months of the rent they owed.
Aisha’s husband works as a driver for the Arab Potash Company. He earns around 700 JOD a month, of which he repays 300 JOD of a house loan, 261 JOD installment for a loan from the Development and Employment Fund and 161 JOD to the National Microfinance Bank. The remainder of the salary does not cover the monthly installment for the last loan. Therefore, Aisha’s husband is forced to pay the remainder in cash, meaning nothing remains of his salary.
Aisha had to work as a cleaning lady due to the loans consuming all of her husband’s salary. The family, consisting of five children, lives off the salary of their eldest (22), who works at a car wash, earning 220 JOD a month and off Aisha’s wage. “We eat and drink from this money,” says Aisha.
The shawarma restaurant put Aisha’s family into a network of monthly commitments and payments, which takes from their share of life essentials such as food, medical treatment and education. “We took all of these loans because of the restaurant. It was not supposed to be like this. And now we are paying to cover all of these loans,” says Aisha.
Economist Milford Bateman confirms that the vast majority of those who are granted microcredits to establish income-generating projects, ended up either failing or displacing other projects that depend on microcredits. Pittman notes that failure of projects leads to excessive debts. Families are diverting their income flows from securing their basics to repaying loans, as well as experiencing “humiliation, despair and degradation to a poverty level that can’t be escaped from in many cases”, he says. This is evident in Aisha’s case, who ended up cleaning houses after starting up a business that aimed at making her a financially independent business owner.
Aisha attributes the failure of her business to the weak purchasing power of her impoverished community. “The sale is low here in Al-Ghor, people only come at the end of the month when they get paid for some days and after that nothing. We were putting a quarter of the meat we usually put and we weren’t selling it. Here we are, having taken loans to open a business but the area we did it in consists of so many projects that fail. The problem lies in the area, a poor area and we don’t have a big market.”
Aisha’s words converge a great deal with the criticism directed at microcredits which allege that production creates a special demand itself. However, Aisha’s case and other women from the Jordan Valley, Al-Ghor, prove the opposite; weakness of purchasing power in a poor community was the fundamental factor in the failure of her business and many others, like Walaa’s shop that sells frozen foods.
In some cases, the programs of microfinance companies and their high interest rates (sometimes starting at 18%) have led to worse poverty, contrary to what they promise. Especially in markets that encourage imports, like in most developing countries in the world, leading to weak competitiveness of products which small businesses can produce.
Most microcredit recipient enterprises in developing countries belong to the informal business sector. Some microfinance enthusiasts consider this sector the key to moving stagnant markets and economies. However, 75% of women’s small enterprises generate profits that don’t exceed the minimum wage. The enterprises’ income averages are the lowest compared to others, globally.
Loans to pay off loans
Four years ago, Walaa (40) applied to the Development and Employment Fund for a loan, together with her husband’s brother and his friend. They were granted 4,000 JOD, and she opened a shop selling frozen foods, which did not last longer than a year and a half. “It didn’t work, there are so many shops around here, and people have no money”, says Walaa. The amount of shops creates an excessive competition, stimulated by microcredit institutions. Competition will not be “the way out of poverty and hardship; rather it is an increasingly ugly manifestation of poverty”, says Milford Bateman.
When the project faltered, Walaa fell behind on her monthly payments to the Fund, which came up to a total of 66 JOD. About two years ago, she stopped paying. Today, the Fund expects Walaa to pay 2,500 JOD.
Walaa, her husband and their four children live in her in-laws’ house. Walaa works on farms for six JOD a day. Nesh’at, her eldest son (22), works as a contractor on a daily wage. Due to several visits by the attorney of the Development and Employment Fund, to claim the accumulated debts, Walaa decided two months ago to borrow a thousand JOD of Tamweelcom in order to repay the loan to the Fund.
Walaa says the amount she earns from her work on the farms goes to the monthly installment of Tamweelcom, which is 77 JOD. Expenses of the family are covered by Neshat’s salary as a contractor.
Walaa comforts herself by asserting that her case is not a special one, as a lot of women from the Jordan Valley are indebted. The borrowing goes beyond day laborers or beneficiaries of National Aid; even teachers with a university education rely on loans, she says. “Everyone takes them, go around Al-Ghor, there is no household that does not rely on loans. If teachers are broke, what then is my situation and that of women like me?”
49 JODs remaining of a teachers salary
Thus, taking loans in the Jordan Valley, Al-Ghor, is not confined to the poorest classes of the community, such as daily-wage-laborers on the farms, the unemployed, or the beneficiaries of financial aid. Consumer borrowing, which is predominant, is not limited to the uneducated. Rabiha, Suhaila and Afnan are three teachers working in one of the state schools of Ghor Al-Safi with monthly salaries between 350 and 450 JOD. All three of them are obligated to repay bank loans they took out in order to buy or build their homes, through the bank to which their salaries are transferred to. The emergence of microcredits and their vast spread contributed to the increase of the three women’s loans. The payments of these microcredits and normal bank loans consumes most of their monthly salary.
“We sit together for hours and hours, telling each other that we are working for nothing. One feels like buying something for themself, but it is impossible,” says Rabiha (34), married with four children. She teaches Arabic with a salary of 430 JOD, leaving her with about 70 JOD after deducting all loan payments. Rabiha pays monthly installments of 255 JOD for a house loan she took from Cairo Amman Bank, the total of which is 18 thousand JOD. Furthermore, she pays 34 JOD monthly for a loan from the Microfund for Women, which she had taken pretending to open a sheep farm. However, with this money she intended to pay accumulated bills, and 68 JOD as an installment for another loan from Tamweelcom, which she had borrowed to install doors for her house.
Rabiha considers the lack of job opportunities combined with generally low wages in the Jordan Valley as a forcing factor for people to turn to microfinance companies. “If there was an outlet other than loans for the people here in Al-Ghor, you might alleviate this problem. If there was the option to work on a Friday or a Saturday, whether us or others, maybe people could breathe a little bit. The only way to breathe here is to take loans.”
Sohaila and Afnan are partners in a number of loans, sharing their monthly amount and payments. 49 JOD is all that is left of Suhaila’s monthly salary of 356 JOD after deducting the monthly payments, while Afnan is left with 60 JOD from her monthly salary of 444 JOD.
Suhaila was one of the first teachers who turned to microcredits among her colleagues at school. In 2011, she was given a financial grant from the Hashemite Fund to build two rooms. Furthermore, she borrowed 8,000 JOD from the Cairo Amman Bank to build a lounge and an additional room. At that time, she obtained her first microcredit from the Tamweelcom branch in Karak, as the corporation did not have branches in Ghor Al-Safi. The loan was worth 1,200 JOD and with it she paid for plaster and tiles for the house. Then she borrowed another 300 JOD from Tamweelcom to pay the workers.
Two years ago, Suhaila was her brother’s guarantor for a loan from the Development and Employment Fund. Her brother needed 5,000 JOD to open a drycleaning shop. Less than a year later, his shop went bankrupt. “Who irons their clothes here? My ten brothers, each of them with four or five pieces send their clothes to him and nobody pays. It’s all on debt,” says Suhaila. Her brother stopped paying the monthly installments of 70 JOD a year ago. Therefore, the institution filed a case against Suhaila to pay the remaining amount. Currently her brother is looking for a new loan to pay off the Development and Employment loan.
Last August, Suhaila and Afnan took out a joint loan of 1,200 JOD from Tamweelcom. Each of them got 600 JOD to cover Eid and the-beginning-of-school expenses. Suhaila’s husband transferred the rest of his salary of three months to pay off a loan he took to buy an air conditioner from the Association of Military Retirees. Two months later, Suhaila borrowed 700 JOD from the National Microfinance Bank to pay off debt owed to the school canteen. She paid 200 JOD allowance of four accumulated payments to a monthly savings collective organised by her sister, with a subscription of 50 JOD per month. “I borrow from the canteen and keep a tab. The money adds up. It reaches around 200 to 300, it depends. They wanted to do an initial clearance for the first semester, so I took a loan and closed the rest of the tab, and I paid into the savings collective of my sister,” says Suhaila.
Last March, Suhaila and Afnan shared another loan of 1,000 JOD from the National Microfinance Bank. Suhaila repaid accumulated debts and other living expenses while Afnan used her share of it to repair the car.
In addition to the Tamweelcom and the National Microfinance Bank loan (in which Suhaila has a share), Afnan pays 214 JOD a month for a house loan of 18 thousand JOD that she borrowed from the Cairo Amman Bank in 2013. She pays 29 JOD to the same bank as an installment for a microloan of 1,300 JOD that she borrowed two years ago to repay accumulated debts for her husband to the Agricultural Credit Corporation. He had borrowed 5,000 JOD to buy a car for the family.
Afnan, her husband and five children live off a monthly net income of approximately 200 JOD. Her husband works in the municipality, earning 300 JOD a month. 160 JOD are deducted from his salary with which he repays two loans and a salary advance. As for Afnan’s salary, 60 JOD remain after deducting the monthly payments.
Suhaila also lives with her husband and five children off about 200 JOD a month. After deducting monthly payments for two loans – one from the Agricultural Credit Corporation and the other from the Housing Bank, which her husband took to help his brother rent a piece of land and cultivate it – the remainder of Suhaila’s husband’s 340 JOD military retirement salary is 160 JOD. While the remainder of Suhaila’s salary is approximately forty JOD, after deducting the payments of two loans to the National Microfinance Bank, the loan from Tamweelcom and the loan from Cairo Amman Bank. “We stay indebted and keep fixing our debts with other debts,” says Afnan.
How do they keep paying? And why are they still borrowing?
With no clear evidence of the success of microfinance companies in achieving their main goal of eradicating poverty, empowering women economically and improving people’s lives, Salim Al-Nimri, Executive Director of Tanmeyah Association, says that women’s repayment is “in and of itself a proof of success”.
Ruqayya (35) comes from another background of female borrowers in the Jordan Valley, Al-Ghor, which is that of monthly paid workers without university education. She is a highschool cleaning lady in the Jordan Valley with a salary of 220 JOD a month. Like other borrowers, the monthly installments come at the expense of a large part of her, her husband’s and two children’s basic needs. Repaying loans for Ruqayya and other borrowers is not linked to financial ability but rather to the fear of consequences and accumulation of late fees. “I was pressuring myself. I didn’t want to lose my dignity or arrive at the stage where I bring offence to my husband or my brothers or go to prison because I don’t have the money. I call my aunt so she could provide pampers for my daughter, when I dont have money. How should I buy them?” says Ruqayya.
This fear is justified, given the relentless pressure practiced by loan institutions. The debt-collectors often caused them embarrassment by following them to their homes, homes of relatives and friends, or even to social occasions, pressuring them to provide the payments in any way. We interviewed one of the women who took out a loan and was late with her payments: “Every day the bank workers come, maybe now [the bank employee] will be behind me and tell me
get it from your neighbors, but my neighbors don’t have money either. It even got so far that she told me to go beg on the streets. I swear to God, she told me to go beg. Sometimes I go to the Jordan Valley, Fifa, to sleep at my sister’s house to avoid them. They keep insisting and pressuring my family.”
Ruqayya and her military husband run the household together. She considers herself a fundamental part in securing livelihood for herself and her family. She and other female borrowers in Ghor Al-Safi are involved in managing family matters, being responsible in a way that exceeds the responsibilities of many women in other communities and classes, who are more dependent on their husbands and families. Oftentimes the responsibility of these poor women extends to their larger families and their husbands’ families, not just their own, in a way that makes it impossible to “empower” poor women or lift them alone out of poverty.
Ruqayya pays three monthly installments to pay off three loans. Additionally, she is a guarantor for her brother’s bank loan and for her sister Ola (31), in a microloan she borrowed to pay her brother’s bills, leasing a land and cultivating it. Ola talks about the extent of a woman’s responsibilities in a poor agricultural society. It makes them involved just as the men or maybe even more. “The woman is the one who bears the burdens and responsibilities of the household. Most of them are farmers here. And farmers, what do they do here? They go to the farmers shop and sign pledges of repayment and they take the seeds and plant them. One year it works, one year it does not. Their wives or daughters take loans and pay on behalf of them. It is hard for them to see their fathers go to prison”, says Ola, who works in a cleaning company with a monthly wage of 200 JOD.
Ruqayya believes that the only available option to cover the daily basic needs in the Jordan Valley is to borrow loans. Unemployment and poverty force families to resort to loans, especially since poverty affects entire extended families without leaving anyone to which the family can turn to when in need. “There is no shelter, the brother barely takes care of his own home, so does the mother. Everyone has their own problems. In Amman, they work two jobs, here we have at most one job or most of us are unemployed. There is no employment, what do you want to do? When life pressures you, we have to go to the National Microfinance Bank, to the Microfund for Women. There is no other way”, says Ruqayya.
Last summer, Ruqayya borrowed 600 JOD from the National Microfinance Bank to cover the costs of giving birth and accumulated expenses she had to pay. Giving birth in the summer resulted in a more expensive electricity bill than usual so she had to borrow 600 JOD from Tamweelcom to pay these bills. In addition to these two loans, Ruqayya pays for a microloan from Cairo Amman Bank that she borrowed to pay off the accumulated house rent.
Ruqayya is left with 67 JOD after deducting the monthly payments for the National Microfinance Bank loan and Tamweelcom of 68 JOD each, as well as 17 JOD for the Cairo Amman Bank loan. Additionally, she pays 50 JOD for the nursery of her two children, which leaves her with 17 JOD of her salary. Her husband’s salary is 400 JOD and he is left with about 130. He pays 150 JOD monthly for the 9,000 JOD marriage loan and the house rent of 120 JOD.
Ruqayya has increased her working hours at school while pregnant, to save a little money the loan payments won’t eat up. Her shift starts at half past six in the morning and officially ends at two. However, for months she has been working overtime until 5:30 pm. “Even though I am tired and would love to take two days off because I am pregnant, I cannot afford it (…) I am saving every penny I can to live off,” says Ruqaya.
Ruqaya is about to finish paying off her National Microfinance Bank loan and believes that this will enable her to “breathe” a little. She says, by finishing with the monthly payments for the loan she can dedicate herself to secure other daily needs. “I will buy three chickens, put them in the fridge, I will buy pampers for my daughter and things we need for the house,” she says.
However Ruqayya, whom we’ve interviewed before Ramadan, was worried about Ramadan and Eid expenses, in addition to postpartum expenses. “We are now starting the month of Ramadan, and Ramadan alone needs money. After Ramadan, there will be Eid. Clothes for the children, and then after the Eid, school starts. I tell you, most people will resort to loans,” Ruqaya says, before we ask her: “Does this mean you might do the same?” “Of course she will,” her sister Ola answers and Ruqaya smiles.
These stories do not suggest that the poor climbed the “development ladder” as the microfinance enthusiasts continuously preach. Inclusion of poor people in vicious circles of borrowing increased the penetration of financial capital into the pockets of the poor and it also intensified their poverty. Loans have become the means available to manage living until the end of the month or until a new loan is obtained, the payments of which will deplete the salaries and pensions, and expand the range of precarious work that imposes difficult working conditions and long working hours.
Women were promised economic empowerment through an unequal relationship between financing institutions and their clients. The difficulties of their lives exacerbate and borrowing deprives them of their already scarce resources and imposes on them what could be called “inverted empowerment” in which those with little to no income fund financial institutions and not vice versa. Women from the Jordan Valley, Al-Ghor, who are suffocated by loans, are forced to either work longer hours for low wages or accept low-paid jobs in order to cover their monthly payments for the loans, as well as interest rates and late fees. Moreover, microcredits deplete the retirement of the elderly, which threatens the entire concept of retirement and its social safety. This often forces retirees to return to work on even more exploitative terms than before.
This reality questions the capability of microfinance to lift individual women out of poverty. The cases of most of the women we interviewed prove that dealing with poverty as a women’s issue in need of individual solutions, does not empower women, rather it increases the severity of poverty they live in. For a poor woman in the Jordan Valley is a member of a poor family as well as a poor society. She plays many roles, and targeting her with special loans only increases the burden on her shoulders. The loans that women get granted are devoured by the needs of the immediate as well as the extended family that are not covered by the meager incomes of women and men. With women being mainly responsible for repaying the loans, their debts deepen.
After more than two decades of microfinance institutions operating in Jordan, their financial loans have not realised their goal to enhance productivity and eradicate poverty. Most of the loans people from the Jordan Valley borrow go towards paying for consumer goods, some of which become doubled with interest and late fees, while monthly payments prevent them from securing other basic goods. This leads to an increase in the demand of loans among the poor and chains them in webs of debts that paralyze their ability to any form of social organisation.
Microcredits did not improve the lives of borrowers in the Jordan Valley, Al-Ghor as Queen Rania expected, nor did they eliminate poverty within a generation, as Yunus foresaw. And it is unlikely that the generation of the debtors’ sons and daughters in the Jordan Valley, deprived of development, will be freed from poverty or that their lives will improve, after monthly loan payments stole what would have provided them with a level of education and health care that would enable them to escape the vicious circle of the seemingly eternal poverty.
*Our colleague Dalal Salameh contributed to the field interviews.
**The names of everyone we met in Ghor As-Safi have been changed to protect their privacy.