MONEY

Banking on Russian Women

Irina Ignatieva, Coordinator, Banking on Russian Women Project, 1999 to 2001, Women and Public Policy Program (WAPPP)

“About five years ago, right before the school year began, I realized I had no money to buy clothes for my kids to go to school. At the time, my husband and I worked as engineers at a motor-building plant. Salaries were not paid at all. The choices I faced were either to become a street vendor or to do I don’t know what. Actually, I already had an idea. Once when I went to the city of Nizhniy Novgorod [255 miles east of Moscow], I noticed inexpensive merchandise that was not available in my town. I spent a lot of time convincing my husband that we should go buy the merchandise and sell it as street vendors in our hometown. I was lucky to get a small (only $200) loan in a bank by using my unpaid salary as collateral. It was a lucky start.”

Olga Nikolayeva from Yaroslavl [175 northeast of Moscow] told me this quite typical story of a Russian woman in transition times. But in one way her story is the exception. The bank loan that helped her develop her business is not available to most women wishing to become microentrepreneurs. Two years ago, the Women and Public Policy Program at the Kennedy School initiated the Banking on Russian Women Project, a feasibility study for building a sustainable microfinance institution to serve low-income Russian women.

The study found that more than 90 percent of these women do not have access to bank credit. Their only source of credit is relatives, friends, and business partners. Banks ignore this market segment. Based on these findings, we determined a microfinance institution would be the only stable source of working capital for micro-entrepreneurs at the terms suitable for this size and type of business.

Focusing the study on women is a natural choice. Women form the backbone of the family structure in Russia. The vast majority of Russian families are poor or very poor. As of February 2001, 27 percent of the Russian population was reported to live below subsistence level (i.e., 31 million people have only $46 of per capita income a month). The household money flows through the hands of women, who bear the responsibility for deciding how income is spent. Seventy to eighty percent of street vendors are women, and more than 50 percent of them hold a university degree. The average monthly family income of surveyed entrepreneurs comes to only $312, with an average of 3.8 members per family.

The survey we conducted showed that up to 57 percent of microentrepreneurs are willing to quit their businesses if offered jobs with income comparable to their current profits. Yet the reality of the Russian labor market is that women over 40 have few job opportunities, even now that the demographic situation in Russia is quite disturbing (1.8 deaths per 1 birth). Among our respondents, 60 percent were over 40 years old.

Based on these realities, a microfinance program providing loans to women microentrepreneurs will continue to attract clients for years, even if new jobs are created due to the very much desired economic growth. In general, 1.5 to 2 women borrowers per 1,000 residents appears to be a realistic number, which comes to around 250,000 women entrepreneurs for the whole of Russia (144 million people). This number includes Olga from Yaroslavl, who awaits for a microfinance program to open in her town.

These conclusions, along with the others described in detail in the full version of the report of the Banking on Russian Women Project, show that the demand for financial services by Russian women is far from being met. This report may serve as a solid foundation for help-ing to develop microfinance operations in Russia. The report can be found at www.ksg.harvard.edu/wappp/programs/
banking.html.