Access To Mainstream Microfinance Services For Persons With Disabilities

Disability Studies Quarterly Winter 2009, Volume 29, No.1

Introduction

In the township of Lugazi in Uganda, Mr. Anthony Mukungu packages and distributes flavored drinking water. Mr. Mukungu has a physical disability and moves in a wheelchair. He reports that the market is growing steadily and he now needs access to additional capital to boost his business. He has therefore approached several micro-finance institutions (MFIs) to apply for credit, but so far he has not succeeded. The reason he gives is that "MFIs think we [persons with disabilities] are not credit worthy."

This article is about persons like Mr. Mukungu and millions of others in similar situations. They successfully operate businesses, but because of their disabilities are not able to access microfinance services. This is in contrast to the United Nations' (1993, 2007) assertion that persons with disabilities have the right to equal opportunities. This article outlines the main mechanisms leading to this exclusion from services, and reports from a pilot project in Uganda where the exclusion mechanisms have been addressed in a systematic manner. The results from the project are promising.

Disability And Microfinance

Approximately 10% of the global population have disabilities, 80% of whom live in developing countries, and evidence suggests that they tend to be poorer than their counterparts without disabilities. For those who live on less than $1 a day, 1 in 5 has a disability (United Nations, 2007).

Employers often resist employing persons with disabilities. In developing countries, 80 — 90% of persons with disabilities don't have a formal job, so most turn to self-employment (United-Nations, 2007). One of the main obstacles facing the self-employed is access to capital, either in the form of loans or accumulated savings. However, since most persons with disabilities tend to be excluded from mainstream microfinance services, their economic activities tend to remain small (Handicap International, 2006; Mersland, 2005).

Persons with disabilities are a low priority and ill-treated target group when it comes to socio-economic integration (ILO, 2002; Lewis, 2004). However, even though studies indicate that they are, on average, among the poorest, not all persons with disabilities are poor. Evidence indicates that persons with disabilities have better performance ratings in the job market, and when they have access to equal opportunities as their non-disabled counterparts, they often experience success as self-employed (United Nations, 2007).

Most MFIs aim to be financially sustainable. This requires an interest level on loans that is high enough to cover all costs, pre-screening of clients to select the best business cases, close monitoring of borrowers, and strict enforcement of repayments from defaulters. Considering the general misunderstanding within society that persons with disabilities are destitute and without the knowledge, skills and opportunities to successfully operate businesses, it is no wonder that MFIs practicing their sustainable business model shy away from clients with disabilities. However, in doing so they miss an important business opportunity, and fail to practice the double bottom line policy of reaching both financial and social objectives, which nearly all MFIs claim (United Nations, 2006; Helms, 2006).

The idea of providing better access to microfinance services for persons with disabilities is not new. Several projects have been initiated, but most have provided persons with disabilities with a combination of training and subsidized credit from non-financially-specialized organizations like Community Based Organizations (CBOs) or Disabled People's Organizations (DPOs) (Handicap International, 2006). The results from these efforts have been mixed. In some cases, the results for persons with disabilities have been positive, but very few approaches have been sustainable. Thus, when the donor support ends, the provision of services is discontinued (Lewis, 2004; Handicap International, 2006).

Aside from Thomas (2000) and Lewis (2004), the academic literature on microfinance and disability published in peer-reviewed journals is basically non-existent. Thankfully, some reports like Handicap International (2006), MIUSA (1998), Dyer (2003), WHO Community Based Rehabilitation Guidelines (forthcoming) and Mersland (2005) provide guidelines, conceptual frameworks, basic knowledge, and when available, some statistics. Most of the literature concerns the need to include persons with disabilities in microfinance efforts, but few studies provide evidence-based insights. Only Handicap International (2006) provides solid data to support the analysis. There is a considerable gap in the literature, particularly when it comes to empirical evidence of the market size, market served, exclusion mechanisms, and the effect of different intervention efforts. This article aims to fill part of this void by sharing lessons learned from concrete efforts, and by providing some initial empirical evidence on the results of the efforts.

Project Background

Over the years, the Norwegian Association of the Disabled (NAD), together with their counterpart the National Union of Disabled Persons of Uganda (NUDIPU), have been searching for intervention models to improve access to mainstream microfinance services for persons with disabilities. Studies have been carried out and several discussions with stakeholders have taken place, but with few fruitful results. The message from the MFIs was always that persons with disabilities were a too risky group for lending and their savings capacity was limited. When approaching the MFIs, NUDIPU and NAD tended to present the target beneficiaries as a needy group and often advocated that MFIs should provide services to persons with disabilities at a lower cost compared to the prices paid by their non-disabled counterparts. The MFIs demonstrated little willingness to better understand the disability segment, and NUDIPU and NAD had limited understanding of the MFIs' business model. As a consequence, most efforts were in vain.

In 2005, NAD and NUDIPU decided to take a different approach. A microfinance specialist was hired and was first given the necessary time to understand the disability "movement" from inside. He basically discovered two things: first, the disability segment constitutes an enormous untapped market opportunity for MFIs; and second, DPOs like NAD and NUDIPU know little about the MFIs' business models and the rationales behind them. In economic terms, a severe situation of asymmetric information was blocking the necessary interaction between the "disability world" and the "microfinance world."

To overcome the situation of asymmetric information it became an objective in itself to bring together important stakeholders. The Association of Microfinance Institutions of Uganda (AMFIU) and the National Union of Disabled Persons of Uganda (NUDIPU) responded positively to NAD's initiative of a joint project efforts. The role of AMFIU was to promote inclusiveness in MFIs while NUDIPU was to inform the disabled population about microfinance. NAD would bring in technical expertise and funding.

The objective of the project is to increase the outreach of sustainable mainstream microfinance services to persons with disabilities in Uganda through two main strategies: first, to increase awareness among MFIs (particularly members of AMFIU) about how to include persons with disabilities in their services; and second, to create awareness among persons with disabilities and their organizations about the pros and cons of microfinance. The project has taken on a realistic scope, as it is clear in indicating that the target group for inclusion into the MFIs is those persons with disabilities involved in, or with the potential to become involved in, sustainable entrepreneurial activities. Furthermore, the project does not advocate reduced interest rates or any other special conditions for clients with disabilities.

The selection of NUDIPU and AMFIU as partners has been important. Both are major umbrella organizations in Uganda within their own areas. They both enjoy a good reputation nationally and internationally, have a long history in partnering with donor agencies, and are respected and listened to by their respective members and other important stakeholders like the authorities. Both partners have dedicated considerable time and effort to better understanding the concept and challenges of inclusiveness. Furthermore, the hiring of two project officers, one in each organization, with the necessary interests, skills and personal dedication, has contributed significantly to the outcome of the project.

The collaboration between NUDIPU and AMFIU takes place both formally in quarterly meetings and informally through weekly and sometimes even daily contact. Thus, the climate between NUDIPU and AMFIU is very good and they both have a solid, in-depth understanding of both microfinance and disability. The achievement of such a close cooperation between a DPO umbrella and an MFI umbrella is in itself a huge step forward, and as far as we know, Uganda is the only country where such close collaboration is in place.

The Exclusion Mechanisms Defined

The theoretical framework for the project is based on Simanowitz's (2001) four exclusion mechanisms that lead to the exclusion of the more vulnerable from microfinance services: exclusion because of low self-esteem, exclusion by other members, exclusion by staff, and exclusion by service design. In addition to these, the project has added physical and informational exclusion stemming from the disability itself. The assumption has been, and still is, that by understanding and gradually removing these barriers, persons with disabilities can be mainstreamed into MFIs.

Exclusion Because Of Low Self-Esteem

Persons with disabilities often experience exclusion and rejection. The accumulation of such repeated negative experiences produces secondary incapacities like lack of self-esteem, which often lead to self-exclusion from public and private services such as microfinance (ILO, 2002). Besides, some persons with disabilities and their families may have the expectation to constantly receive charity (Thomas, 2000) which is incompatible with sustainable MFIs.

Exclusion By Other Members

Most MFIs use different types of group methodologies for microcredit, like solidarity groups or village banks, where members themselves decide who to include in the group. Local stigmatization or the perceived risk posed by persons with disabilities becoming members in groups may discourage community members from including them.

Exclusion By Staff

Due to attitudes and prejudices within society, the staff of an MFI will often deliberately or unconsciously exclude persons with disabilities. The personnel often lack the necessary experience and training to distinguish between real credit risk and perceived credit risk. Often a credit officer is not able to see through the disability and recognize the real ability of a person with disability. MFI staff, and particularly the credit officers, are therefore a core target group to influence. However, if such influence is to be efficient, it must be backed by MFIs' top management.

Exclusion By Design

The credit methodology practiced by MFIs often hinders persons with disabilities and other vulnerable groups from participating. Mobility challenges make weekly installments a greater obstacle for persons with disabilities. Other examples include compulsory upfront savings, fees as high as 20% of the loan amount and short repayment time. Moreover, since credit history in microcredit in many ways replaces formal collateral or guarantees, it becomes difficult for persons with disabilities to get started to build a credit record.

Exclusion Because Of Physical And Informational Barriers

The disability itself can be a major barrier to access offices or information. MFIs give information in both verbal and written form, inaccessible to many deaf or blind persons. Branches are located far away from people's homes, and to enter the premises stairs often have to be climbed and crowds have to penetrated.

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