Microfinance in Developing Countries - Research Paper Example

Microfinance in Developing Countries 1.1 Development definitions: Historical perspective Development is commonly taken to mean economic development, which traditionally signifies the creation of wealth within an economy. The principal objective of this definition of development encompasses the optimum use of the factors of production in order to broaden the tax base and create more jobs, thus fueling economic growth. Blakely and Leigh (2009), however, makes the distinction between economic development and economic growth. The blind and single-minded pursuit of economic growth could in fact destroy the foundation of economic development. For instance, local economic growth may depend on an exhaustible supply of a particular raw material – timber, for instance. To fuel economic growth to a maximum would necessitate harvesting of as much timber as possible, to the point that the timber would have been all cut down. At this point, production would stop, and people would go out of jobs, even as wealth creation is arrested. Therefore, while economic growth may be taken as one of the indicators of economic development, it is not the only indicator. The production aspect must be balanced by considerations of sustainability and replenishment, for true development to take place (Blakely & Leigh, 2009, p. 74). Instead, it is best to adopt the definition of local economic development as a three-part definition developed by Blakely and Leigh (2009). It states: “Local economic is achieved when a community’s standard of living an be preserved and increased through a process of human and physical development that is based on principles of equity and sustainability.” (p. 75) The above definition, profound and incisive as it seems, is best understood when it is resolved into its three essential parts: “(1) First, economic development establishes a minimum standards of living for all and increases the standard over time. (2) Second, economic development reduces inequality. (3) Third, economic development promotes and encourages sustainable resource use and production.” (Blakely & Leigh, 2009, p. 75). From the foregoing definition, it is clear that economic development is not only measured in GDP and growth rates, but rather in the sustainable improvement in the quality of life such development can bring to the community. 1.2 Micro-Finance Conceptual Framework Even prior to its being called “micro-finance”, forms of small-scale financing have already been afforded to very poor families in developing countries such as India. However, with the advent of the term “micro-finance”, there appears to be a paradigm shift in the perception of people to the new facility. The old concept encompassed providing credit, at subsidized rates of credit, to poor families residing in rural and semi-urban areas, through public and government financial institutions (Dhar, 2005). Under the new concept, the target is rural and urban poor households, emphasising on women borrowers, and aims for the provision of finance for the purpose of asset creation and stressing the principle of “Borrower knows best” (Kaladhar, 1997 in Dhar, 2005, p. 10). Innovative features include the user-friendly delivery of credit and facilities, easy and fast disbursement of loans of small amount or short maturation, vigilance in maintaining high recovery rates through peer pressure, incentives such as access to large loans after successful settlement of the first loan, and employment of peer pressure and peer support to encourage savings. Micro-finance also now includes a broad range of financial and non-financial services, such as entrepreneurship development, capacity building, and skills upgrading. Under the new paradigm, financial intermediation with self-sustainability of institutions is emphasized, with the results measured in both quality and quantity of financing made available (Dhar, 2005). Dhar (2005) cites the following basic premises on which the operational framework of micro-finance rests are: a. A viable means for poverty amelioration is creation of self-employment programmes or projects. b. Access to capital is a major constraint in forming micro-enterprises. c. The poor, specially the poor women, have the innate capacity to save and mobilize their savings into productive economic activities. d. Since credit can follow thrift, very small loans can be given to the poor to enhance their investment capacities. e. The borrower knows best how to utilize the money and then arrange for repayment of loans. f. Financial service delivery systems are decentralized and people’s organizations at as facilitators and intermediaries. g. Repayment periods are generally short. The amount of loan may be increased based on the borrowers’ past credit history to gauge his record of loan repayment. This is commonly known as the loan graduation process. h. Loans to members are not concessional and are usually quite high. i. Loans given by micro-finance institutions should involve simple procedures for reviewing and processing loan applications, and quick sanction and disbursement of money (Dhar, 2005, p. 11). Some researchers have questioned, though, the new directions taken by some micro-finance programmes, contending that it is questionable whether such services truly benefit women. There are those who argue that in many current models of micro-finance, the main, at times overriding, emphasis is financial sustainability, which tends to divert resources from strategies that would emphasize more empowerment and poverty alleviation (Mayoux, 2001). Presently, there are four main views concerning the potential benefits of micro-finance to women’s empowerment and sustainability. According to Mayoux (2001, p. 246), they are as follows: a. optimism about possible global development of sustainable micro-finance programmes empowering women; b. recognition of limitations of existing models, but possibility of sustainable strategies, minimizing negative impacts and enhancing contribution to empowerment; c. provision of financially sustainable micro-finance programmes important as a strategy for poverty alleviation; empowerment as an issue to be addressed by other means; and d. current emphasis on micro-finance programmes a misplaced diversion of resources from more effective empowerment strategies (Mayoux, 2001, p. 246). The four views above are not mutually exclusive, and cut across some underlying paradigms (Mayoux, 2001). For instance the Financial Self-Sustainability Paradigm has for its main origin and inspiration the models of micro-finance promoted by USAID and CGAP, based on the 1997 Micro-Credit Summit in Washington, DC. As such, it is currently dominant within most donor agencies. Its reason for targeting women is efficiency consideration arising from high female repayment rates. It main policy focus is the setting up of financially self-sustainable micro-finance programmes that increases access to micro-finance services for large numbers of poor people. Its aim is economic empowerment, expansion of individual choice and capacities for self-reliance Another paradigm is the Poverty Alleviation Paradigm. Its main origin and inspiration here is the integrated poverty-targeted community development programmes. Its reason for targeting women is the higher levels of female poverty and responsibility for household well-being. Its main policy focus is to pursue micro-finance as part of an integrated programme to alleviate poverty and vulnerability and increased well-being for the poorest households. 1.3 Microfinance & Development Micro-finance means the provision of “small-scale financial service to people who operate very small or micro-enterprises, who work in agriculture, fishing, and herding, and who provide services and other individuals or groups at the local levels of developing countries both rural and urban” (Robinson, 1996 in Dhar, 2005, p. 9). There is a difference between microcredit and microfinance. Microcredit consists of small loans, usually below US$ 200, extended without the benefit of collateral, to very poor people, usually women; its purpose is to establish self-employment projects that generate income for the borrowers and allow them to care for themselves and their families. Microfinance, on the other hand, is comprised of microcredit programs with social intermediations. Aside from microcredit, it also includes micro-savings, micro-insurance, and remittance transfers. Proponents of microfinance also provide training, advice on health, nutrition and sanitation. Therefore, microcredit is but one aspect of microfinance (Haque, 2010). The origins of micro-finance is traceable to 1944, as cooperative movements by Germany’s Raiffeisen Society, and in England by Rochdale Pioneers. However, the term “micro-finance” became popular in the 1990s, in particular after the World Summit for Social Development, held in 1995 in Copenhagen. During the summit, the importance of access to credit by low income classes, women, and other vulnerable groups, was emphasized. In 1997, the movement gained another boost with the holding of the World Micro-Credit Summit in February 1997 in Washington, DC. During the summit, a countdown was announced, to the year 2005, for the eradication of poverty among 100 million of the world’s poorest families, targeting women in particular with micro-credit aimed at self improvement (Dhar, 2005). In the last 20 years, microfinance has proven to be a vital development tool capable of addressing the needs of vast number of poor people, in particular poor women, with a means of sustainable financial support for their livelihoods. In the 2005 State of the Microcredit Summit Campaign, microfinancial institutions were reported to have reached more than 92 million clients, in the process benefiting as many as 333 million family members. Poor people are no longer seen as charity recipients but customers to be attended to and served; of these, women comprise 83% - roughly 66 million – of reported microfinance clients. And not only are they better clients than men, being better repayers, but they also act as key drivers of development, channelling their extra income directly to the benefit of the family (McCarter, 2006). The success of microfinance as a tool for economic development and advancement has been acknowledged as one of the United Nation’s major economic initiatives. In 2005, the World Summit was held to discuss the Millennium Development Goals (MDG). In this meeting, 151 heads of state from around the world participated to thresh out issues that stand in the way of economic progress, and map out solutions to global problems in this arena. The 2005 Summit was the first opportunity for world leaders to assess the progress made towards achieving the MDG, the purpose of which is to eradicate poverty by the year 2015. The Outcome Document of the Summit stressed the importance of microfinance and microcredit. In Paragraph 23(i) it stated: “We recognize the need for access to financial service, in particular for the poor, including through microfinance and microcredit.” This echoed the 2002 Monterrey Consensus, where it was specified in paragraph II, A, 18: “Microfinance and credit for micro-, small and medium-sized enterprises, including in rural areas, particularly for women [emphasis supplied], as well as national savings schemes are important for enhancing the social and economic impact of the financial sector” (UNDCP, 2005, p. 4). Microfinance has undoubtedly been extolled for the role it has effectively played in some countries or in certain cultures and social settings. However, there are issues that have been raised as to the universality of its effectiveness in advancing the causes of empowerment, poverty alleviation and commercialization. Studies have been conducted with mixed results (Holvoet, 2005, p. 75). Findings along this nature are further explored in Chapter 4. There have also been investigatory forays into Islamic microfinance which, like Islamic banking and finance, have afforded an alternative to conventional financial models and institutions. Variations in the Islamic approach to credit and finance have provided a new perspective on risk sharing and speculative practices that, given the conventional models, have caused and exacerbated the recent financial crisis. An examination should focus on the possibility of Islamic microcredit as an alternative to present microcredit schemes. The UN efforts have driven the microfinance and microcredit initiatives that were pursued by agents of development in different countries, one of which is Saudi Arabia where limitations of gender roles have constrained women’s freedoms and self-advancement. 1.4 Micro-credit and women’s empowerment In the Economist, a picture is drawn of the typical morning in a Kampala slum in Africa. Men sit around in circles getting drunk on local millet beer, while the women get busy supporting their families by running the Otim bar. They brew the intoxicating drink in a large oil drum with a Shell logo visible on the side, and the business is said to have grown rapidly, in large part due to the availability of micro-credit. The availability of micro-credit has been considered quite fortuitous in these parts, because poor people cannot usually borrow from commercial banks for lack of collateral. It is possible for the poor to borrow from loan sharks without security, but at usurious rates of 10% to 20% per day, leaving them poorer than ever, and failure to pay results in severe bodily harm (Economist, 2001). Microlenders in Bangladesh have adopted the Grameem model, wherein one of a group of rural women take out a microscopic loan (i.e. as little as US$25) to start a business, and it is only when this loan has been repaid that the next woman in the group may borrow. The application of peer pressure keeps default rates very low (Economist, 2001). There are areas where poor people often move, and therefore do not know their neighbors well. In Africa and Latin America, stepped-lending is considered more effective. A prospective borrower puts up a little money of her own, and the microfinancier lends her the same amount as her portion. Upon prompt repayment, she is allowed to take out a larger loan. With every improvement of her credit record, the higher the sum she is allowed to borrow. The incentive of being allowed a higher level of credit is what ensures that default rates are low (Economist, 2001). According to the Microcredit Summit Campaign (MSC), about 14 million poor people are currently availing of micro-credit, with each borrower believed to be supporting an average of 5 family members. Microlenders prefer to lend to women, because any additional income brought about by the micro-credit is used to feed and clothe the children. Men, on the other hand, usually spend their extra cash on intoxicating liquor (Economist). Microcredit is thought to work better than handouts because (1) it fosters the formation of small enterprises, and (2) it can be self-sustaining when well run, as repayment rates of higher than 98% are common (Economist, 2001). Sometimes, however, the microcredit programme fails to work out as expected. 1.5 Effectiveness of Microfinance Programmes Assessment of the effects of microfinance programmes on the empowerment of women has generated inconclusive and mixed results. Some findings support the observation that microfinance is able to induce sustainable economic, social and political empowerment, but others indicate that there exist evidence pointing to the deterioration of the over-all well-being of women. In the case of women’s empowerment, negative findings were arrived at by Leach and Sitaram (2002). It described the disappointing results of an NGO project targeted to empower scheduled caste women. The poor outcome of the project was primarily attributed by the researchers to the exclusion of male relatives from playing a meaningful role in the economic activity generated by the microcredit, engendering hostile feelings among the men against the project. However, the findings do admit that even without the male hostility, the project would have failed as a commercially viable enterprise, because the women undertook a high-risk area of economic activity (cocoon and silk reeling), did not have a clear strategy, and lacked knowledge on how their work could be sustained. It should be noted that the women were not without training; the NGO provided a very intensive 28-day training programme spread over 5 weeks, with formal and informal components. In the end, not only did the target empowerment not materialize, but also the expected mobility and poverty alleviation (Leach and Sitaram, 2002, p. 575). In contrast to the Leach-Sitaram findings, a slightly more recent study in South Africa (Kim, et al., 2007, p. 1794), not only showed a microfinance program positively resulting in women’s empowerment, but also that the findings, both qualitative and quantitative, indicated that the economic and social empowerment that resulted from microfinance had contributed to a significant reduction in intimate partner violence. The researchers attribute this to the combination of the microfinance program with participatory training given by the NGO, on understanding HIV infection, gender norms, domestic violence, and sexuality. Three experts have given contradictory findings for the effect of microfinance on poverty alleviation. David Roodman, research fellow at the Center for Global Development, categorically stated in an open forum that while microfinance is touted as the best way to alleviate povery, there is little evidence of this. What microfinance does is to enhance individual autonomy, and positively builds institutions and creates competition. Research shows, however, that causal link between microlending and poverty reduction is weak. According to Roodman, “It’s hard to know whether it’s the borrowing that’s making them better off, or if it’s that they are better off so they feel more comfortable borrowing.” Another concern is about the type of people benefited by microfinance, that microcredit generally fails to reach the poorest of the poor, but instead is extended to those around the poverty line, and maybe even a little above it (Foreign Policy, 2010). Another who speaks out against the effectiveness of microfinancing is no less than the first lady of Colombia, Lina Moreno de Uribe, who declared that microcredit is not always the appropriate strategy. For instance, microcredit does not work well in communities that do not have a culture of saving. Another qualified opinion is expressed by Alejandro Foxley, senior associate at the Carnegie Endowment for International Peace and former minister of foreign affairs of Chile, who said that findings did indicate that microcredit programs did results in an increase in spending on health care and increased enrollment of poor children in school. However, he said that “when you do an a posteriori evaluation of the permanent effects on the beneficiaries, it can be asserted that there is no improvement in the educational outcomes or in health indicators” (Foreign Policy, 2010). In short, there are short term indicators, but these are not carried out onto long-term benefits, implying that other cultural factors may be at play that tend to neutralize any short-term positive effects of microcredit. Another study conducted a household survey in South India, in order to determine the importance of the borrower’s gender and the lending technology for intra-household decision-making processes. The aim is to discover the effectiveness of decision-making agency in creating favourable results in microfinance programs. The study found that direct bank-borrower credit delivery poses no challenge to the prevailing decision-making patterns in the home, regardless of whether the credit recipient is the male or the female in the household. However, when the credit is so structured that the facility is combined with financial and social group intermediation, women’s group membership significantly shifts overall decision-making patterns, from following norm-guided behaviour/male decision-making, to joint and female decision-making. The longer the group membership and the more intensive the training and group meetings the borrower attends, the more permanent the patterns (Holvoet, 2005). Another effect of microfinance programmes has to do with the empowerment not only of women, but of women with disabilities. The disabled of any gender faces considerable obstacles in their daily lives, and because of the disparity between the social roles of men and women, women with disabilities encounter great difficulty in participating in economic development initiatives. Lewis (2004) states that microfinance services had failed to deliver poverty alleviation and women’s empowerment, moreso in the case of disabled women. The study espouses that development projects be made more accessible to women with disabilities, and in many cases to seek them out intentionally. There is also a need to build the capacity of organisations that are led by women with disabilities, and to engage them in global dialogue on microcredit schemes that would be more responsive to their particular situation. It is worthwhile to explore creative funding approaches to pay for disability-related costs (Lewis, 2004, p. 38). 1 .6 Critique of the impact of Micro-financial resources In many poor countries, disease disables the borrower, causing default rates to rise. This was experienced in Africa where the spread of AIDS either made the borrower too ill to work or because the family’s medical bills rose too high. Microborrowers were surveyed in 14 African states, and it was found that 95% of those surveyed had difficulty defraying medical expenses, 77% needed to pay for funerals, and 50% encountered difficulties finding money for the orphans of relations who succumbed to AIDS. Wherever possible, microlenders link health and hygiene education programs to the loan grants, but a more efficient way that is explored by FINCA (a microlender in Uganda) is to combine microcredit with micro-health insurance. The scheme is to allow members free medical treatment (for different health conditions) at a nearby mission hospital in return for a small quarter fee. Chapter 2 Gender and Development in Saudi Arabia 2.1 Background: Overview and definition of Saudi Arabia’s culture and society Before an indepth discussion could be undertaken on gender, development and microfinance in a particular social and cultural context, it is important to familiarize oneself with the attributes of this society and culture. Society here is understood to be “an extended social group having a distinctive cultural and economic organization” (Princeton University, 2010). Culture, on the other hand, is “all the knowledge and values shared by a society; the attitudes and behavior that are characteristic of a particular social group” (Princeton University, 2010). The discussion shall therefore center on the Saudi Arabian people and their way of life, and try to describe the essence of its commonly held values, attitudes and behavior. Saudi Arabia’s population, as of 2008, is 28 million strong, which is inclusive of 5.6 million resident foreigners. The country occupies nearly two million square kilometers of what is primarily desert land, with rugged mountains in the southeast. Before 1960 a great number of Saudi Arabians were nomadic or seminomadic; with the acceleration in economic expansion brought about by oil exports, at least 95% of the population have since then settled. Modern metropolises and urban communities have been established, and in some cities population densities of more than 1,000 people per square kilometer have been recorded (U.S. Department of State, 2010). The Kingdom of Saudi Arabia is the birthplace of Islam, which is traced to within the first one hundred years after the death of Prophet Muhammad at about 632 AD. Islam then spread west to Spain and east to India, and from there to other parts of the globe. The strong Islamic ties have formed a highly conservative cultural environment in Saudi Arabia. The country officially follows the strict Wahhabi Interpretation of Shari’a (Islamic religious law). There are narrowly defined ethical standards, and men and women are officially segregated in all public events and even the workplace (US. Dept of State, 2010). Saudis are ethnically Arab, with a few descending from mixed origins such as Turks, Iranians, Indonesians, Indians, Africans and people from neighboring countries who migrated and settled along the Red Sea coast, in the Hijaz region. Expatriates of other nationalities, both Arab and Asian, could be found in significant numbers, having found working contracts in the Kingdom. Westerners are relatively few, numbering under 100,000 (US. Dept of State, 2010). The economy of Saudi Arabia is dominated by its oil exports, accounting for 90% of export earnings, with government exercising strong controls over the major economic activities. The country controls 20% of international petroleum reserves, and it is the largest oil exporter in the world. The government is pushing more towards diversification in the private sector, creating incentives for investment in heavy industries such as power generation, telecommunications, natural gas exploration, and petrochemical processes. About 5.5 million foreigners work in the country, although unemployment is a problem among its own nationals. Training and education has been bolstered to create greater chances for employment. The first co-educational university in the country, the King Abdallah University of Science and Technology, was recently established. Furthermore, the government finally acceded to the World Trade Organization as recently as 2005 in order for it to be able to attract more foreign investments (CIA, 2010). 2.2 The definition of poverty in Saudi Arabia Saudi Arabia recorded a per capita income of US$18,895 in 2008; as such, it is one of the high-income developing countries. The Kingdom has a very sophisticated economic planning process, that measures not only income per capita, but also life expectancy at birth, primary education enrollment figures, and the percentage of the population that has access to potable water. Economic and social analysis of the UN Development Programme (UNDP) and the country’s National Development Plan draws attention to the need for equitable distribution of wealth, including the benefits brought about by overall development and economic growth. Despite the high per-capita income of the Kingdom of Saudi Arabia (ranked 45th in the global scale), the country ranked only 61st on the 2007/2008 UN Human Development Index, a composite statistic that ranks countries according to the level of human development. In particular, Saudi lags behind other countries in terms of women’s equality and empowerment (Whitman, 2008, p. 12). The mechanics that had pushed growth in Saudi is partly to blame; oil-export income benefited a small ruling class, which, according to one political science theory, rendered them independent of taxpayers and therefore resistant to democracy movements (Whitman, 2008). As a result, income and gender inequalities continue to exist in society The effect of export-income dependency has other effects on society and the economy. According to Saudi political scientist Turki Hamad, the problem in Saudi Arabian society is the shrinking middle class as more people tend to become poorer, which is a significant driver of growing fundamentalism (Murphy, 2003). Furthermore, economic distortions are introduced and inefficiencies encouraged. Although fossil fuel reserves will eventually run out, this realization does not spur incentives to develop other industries. Companies and local businesses are often extended government subsidies, for which reason they avoid the consequences that result from market competition that would have made them more efficient (Whitman, 2008, p. 13) As a result of economic distortions, concentration of wealth in the ruling elite, and the lack of efficient means of economic activity that would tend to transfer wealth through the different levels of society, and increasing number of young citizens are finding difficulty finding jobs and acquiring houses in the suburbs. Slums have sprouted in the outskirts of Jidda and the capital Riyadh; women trapped in poverty beg for money outside their mud-brick houses. There is chronic joblessness and shrinking incomes. In the meantime, Saudi is one of the countries that still import manpower in significant numbers, despite the unemployment problem that has unofficially reached 13%, according to experts (official figure is 8%). This is because foreign worker work heaper, are better trained, and have more experience than the young Saudis. Besides, many of the fresh Saudi graduates hold University degrees in such programs as Islamic studies, for which there is little demand in the employment market. Finally, the inefficient use of resources is creating a large public debt and ballooning deficit (Murphy, 2003). The government has taken steps to address the growing poverty in the country. The programs are aimed at “all those on the fringes of society” (Al-Qafari, 2009). One of the tools expected to effectively address this problem is the Bab Rizq Jameel. 2.3 Gender Roles in Saudi Arabia As had previously been mentioned, Saudi Arabian culture is highly conservative and abides closely by Islamic traditions. In compliance with the strict interpretation of Islamic law, men and women are segregated in affairs of society, and consequently are regarded differently. These have implications on the roles of the gender in social and economic institutions. 2.3.1 Gender equality and social institutions Societal norms and rules in Saudi Arabia are patriarchal, with women being treated as second-class citizens, such that they continue to face discrimination in nearly all facets of social life. Women enjoy fewer rights than men, their freedom of movement is restricted, and their economic opportunities are grossly limited. In the few activities they are allowed by the law and society, women’s actions and choices are subject to the permission or wishes of their mahram (husband or closest male relative) (OECD, 2007). There is further a tacit ban on showing women in the mass media, although there is no law expressly forbidding it. There is also no protection for women if they are physically attacked for appearing in the media, thus while society tolerates women’s participation and success in different fields, it repulses being confronted with evidence of this. Saudi society appears to condone public criticism by conservatives that heaps abuses on women they label as “rebellious”, for making their success known through the media. Seclusion from the media is not only imposed upon working class women, but also female members of the royal family; prior to May 2005, Saudi princesses have never appeared in publications. It is only when the daughter of King Faisal, Princess Loulwa al-Faisal, became delegate in a Saudi trade mission to the United States that any female royal member appeared in a local newspaper (Al-Mohamed, 2008). 2.3.2 Gender and Education Women in Saudi Arabia are allowed to pursue higher education, but educational decisions tend to be limited to certain areas. For instance political science as a major field of study had until recently been closed to women. This is why women activists who opt for reform have worked towards the restructuring of some of the universities and provided the political science major for women (OECD, 2007). Also, the traditional gender roles are incorporated and integrated into the mandatory religious-studies curricula observed in the educational system, in order to comply with the requirements of the country’s powerful yet culturally defensive ulama, (i.e. religious scholars) (Monshipouri, 2003). 2.3.3 Gender roles in business According to the Saudi Network, doing business in the Kingdom is somewhat more challenging for women, since gender separation is practices in Saudi Arabia. Public places such as hotels and restaurants have family rooms where women may be served with their husbands. Women are required to dress conservatively, meaning she should be garbed in long skirts as appropriate, elbow-length sleeves or longer, and unrevealing necklines. Traditionally, Muslim men refrain from shaking hands with women or engage such other casual body contact that they would normally employ when socializing with men. However, Saudis who are exposed to Western culture may do so (The Saudi Network, 2010). 2.3.4 Gender Role in Politics Saudi Arabia is one of those few remaining countries in the world where women still do not have the right to vote for their representatives in government, much less run for office (Rasha, 2008). Today, however, women are already allowed to occupy advisory positions in government, such as Dr. Nora Alyousif who is one of Saudi Arabia’s six state-appointed parliamentary advisors. A careful scrutiny of the powers held by female officials in Saudi appear to be superficial; Princess Dr. al-Jawhara bint Fahd al-Saud, for instance, occupied the position of undersecretary of education for women’s colleges for a decade, after which she was appointed to the position of president of Riyadh University for Women. However, she admitted in a conference on women’s rights that as undersecretary, she “did not have the necessary powers to make decisions, even though this position is the third highest ranking in the Ministry of Education” (Al-Hayat, November 30, 2006 in OECD, 2007). 2.4 Gender and female labor force and participation The levels of participation of Muslim women in the paid labor force are dependent upon the development strategy adopted by the particular economy and, therefore, its need to tap its female labor. During the oil-boom years before the mid-eighties, the oil-centered economies such as Saudi Arabia had little need for a full complement of its labor force in order to maintain growth, as oil exports practically dominated industry. Thus, the result is that there are few women in the labor force. In contrast, other Muslim countries that relied more on labor to boost productivity had a high proportion of females in the labor force; this is characteristic of Tunisia, Malaysia and Indonesia. In these societies, the need for a greater labor force superseded the traditional male-breadwinner/ female-homemaker roles espoused by religion (Offenhauer, 2005). 2.5 Globalization and women’s roles in production Presently, Saudi Arabian women are prohibited from driving cars, and rape victims are confronted by accusation of the crime of fornication for which the penalty is to be whipped in public. However, education is slowly changing the social make-up of Saudi, wherein half of all high-school graduates are women. If in due course Saudi is to wean itself from its dependence on oil, it will rely on an increased presence of educated women in the production of novel goods and services, particularly if it wishes to take advantage of the global economy (Supp, 2009). The effects of globalization has been addressed by two dynamics of reform – reform from above, which is reform implemented through legislation and policy (state feminism), and reform from below, or groundswell reform (Islamic feminism). Some authors advocate pragmatic (as against liberal) feminism by basing their argument on women’s rights as a function of social processes – that is, change is encountered in an inevitable evolution, rather than being assumed in a foundational or basic manner. Ultimately, however, in an environment of increasing globalization, women will have to contend with patriarchal institutions and customs in both economic and political reforms (Monshipouri, 2003). The state feminism in Saudi Arabia has spawned the emergence of an elite group of women with wasta, referring to highly-placed connection in the political environment. It is not surprising that women who are able to successfully cross “the established gender paradigm” take care to be fully garbed in hijab, the Islamic dress code. This is to show that they continue to adhere closely to Islamic tradition and values while they invoke the model of liberated women (Monshipouri, 2003). 2.6 Women/family support programmes In an attempt to encourage economic independence for women, Cabinet decision 120/2004 sought to address certain aspects of women’s independence, particularly to encourage women’s employment and to establish women’s centers to safeguard women against abuse from legal guardians. However, years after the decision’s promulgation, its provisions have yet to see implementation (Al-Mohamed, 2008). Chapter 3 The Bab Rizq Jameel 3.1 Why microcredit? (BRJ program) The Bab Rizq Jameel (BRJ) is a program is designed as the “first stop” for the new entrants to the work force, the young Saudi men and women in search of job opportunities. It was begun in 2002 by the Abdul Latif Jameel Community Service Program. It is specifically intended to address the double-digit unemployment figure in Saudi. From the date it was commenced in 2002, the program has created 119,000 jobs to date through the entire Kingdom; in 2009 alone, over 41,000 job opportunities were created by BRJ. The BRJ has two categories of programs – the Employment and Training Programs, and the Self-Employment Programs. Under the Employment and Training Programs are: (1) The Direct Employment Program (2) Training and Employment (3) Specialized Vocational Institutes (4) Corporation for Vocational Institute Under the Self-Employment Programs are the following: (1) Taxi Ownership (2) Truck Ownership (3) Small Business (4) Productive Households (5) Franchising Support (6) Commercial Centres Each of the programs are designed to enable the participant to be productively employed as soon as possible. For instance, the program offers training courses according to the employment specifications of the private sector. Interest-free loans are arranged with candidates who sign up for the training courses, on the condition that they repay the loan when they are already successfully employed. The training programs given here include training for sales, technical assistants, spare parts assistants, mechanics, and other programs depending upon market demand. 3.2 The goal and main objectives of the BRJ The long-term goal of the BRJ is to create over 500,000 jobs by the year 2015, throughout the Middle East and North Africa. The objectives of the BRJ program is “to create meaningful job opportunities by: Matching young Saudi males and females looking for job opportunities to the opportunities available and introducing these potential recruits to various companies and establishments; Supporting owners of small business projects by providing them with interest-free loans Supporting “household” micro projects Offering franchise opportunities to young entrepreneurs wishing to start their own business (Bab Rizq Jameel.com, 2010) Apparently, the efforts of BRJ have been successful, and this has not gone unnoticed by members of the royal family who are likewise seeking improvements to the situation. In 2009, during her August tour, Princess Seetah Bint Abdullah Bin Abdul Aziz commended the BRJ programs and the effort they exert in the creation of job opportunities in Saudi. The tour of the Princess took her to a couple of successful ventures pioneered by the programs. 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