Flavia Nakabuye Bwire and George Mukasa are project officers with the Association of Microfinance Institutions in Uganda (AMFIU) and the National Union of Disabled Persons of Uganda (NUDIPU) respectively. They are responsible for the implementation of the reported project. Roy Mersland is an experienced microfinance consultant and a researcher at Agder University in Norway. He helped design the project and participated in the initial implementation efforts.
The authors thank participants at the UN Convention on the Rights of Persons with Disabilities: A Call for Action on Poverty, Lack of Access, and Discrimination. 19 — 22 May 2008, Addis Ababa, Ethiopia for useful comments and inputs.
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.
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.
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 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.
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.
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.
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.
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.
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.
In the project there are activities to confront all five of the exclusion mechanisms.
AMFIU is primarily responsible for working on this barrier, with tailored training for credit officers and the sensitization of MFIs' top managers as the main activities. In principle, AMFIU aims to influence all of its 74 members. However, as a pilot project, six of the top 15 MFIs in Uganda have been specially targeted. In each targeted MFI, efforts are first put into sensitizing top management. The assumption is that little can be done if top management does not actively support the idea, and experiences so far have confirmed that real changes can only be expected in those MFIs where top management actively supports the idea. Besides, the branch managers must actively push the idea of inclusion to their credit officers. To keep the issue of being an inclusive MFI on the agenda, top management is recommended to address the issue in management letters, articles in newsletters, staff meetings, etc.
During 2006 and 2007, target training of 502 staff in 49 branches was carried out. Respecting the demanding job of a credit officer, the training of around 90 minutes normally takes place early in the morning in the branches of each MFI. The content of the training is divided into four parts:
In addition to the training in the branch offices and the sensitization of top managers, AMFIU actively disseminates the project and the idea of inclusion in its regular contact with its members.
NUDIPU is primarily responsible for work on this barrier. The main activities are tailored training for entrepreneurial persons with disabilities and the sensitization of DPOs. The training workshops for persons with disabilities comprise three main parts, outlined as follows.
The training is organized as follows:
During 2006 and 2007 a total of 1,603 people participated in the workshops. A considerable number, around one third, were not actively involved in businesses. Of the total number of participants, 474 filled out an evaluation form. On average, those who filled out the form are estimated to be slightly better off than the other participants. Table 1 reports their type of disability, their monthly earnings from their businesses, and their relationship with financial services.
| Disability | Business earnings (monthly US$) Exchange rate Ush:US$ = 1:1800 |
Relationship with MFIs, banks, SACCOs, etc. | |||
|---|---|---|---|---|---|
| Physical | 293 | Above 444 | 27 | Members with ROSCAs | 178 |
| Other | 181 | 333 - 444 | 41 | Having Savings Account | 150 |
| 222 - 332 | 80 | Servicing Loan | 79 | ||
| 111 - 221 | 122 | No financial relationships | 67 | ||
| Below 111 | 180 | ||||
| No earnings | 24 | ||||
| Total | 474 | Total | 474 | Total | 474 |
As indicated in Table 1, only around 5% of those handing in the evaluation form had no earnings, and around one third earned above $222. This indicates that a considerable proportion of the persons with disabilities constitute an interesting market opportunity for MFIs. However, only 16.7% are servicing a loan as the preferred financial system is the informal Rotating Savings and Credit Associations (ROSCAs). More than 60% of the participants have a physical disability, while the rest have a mental impairment, are blind or deaf, or are caretakers.
To reduce exclusion by other members, the MFIs are generally recommended to offer individual rather than group services to persons with disabilities. The credit officers are also recommended to sensitize their credit groups. However, imposing persons with disabilities into groups should be avoided as this may hamper the self-selection of credit groups and thus endanger their performance.
The societal challenge related to the general discrimination of persons with disabilities is a Gordian knot, and the project's ability to untie it is limited. However, the project considers it important to make society in general aware of the problem of exclusion, as well as the possibility of inclusion. Thus, some efforts have been invested in advertising the project through radio and TV talk shows over a total of 700 minutes and 90 minutes respectively during 2006 and 2007. Lobbying with government and industry officials is also carried out.
Inappropriate design of credit and savings products is a major challenge in the microfinance industry. Some examples: Repayment schedules are not aligned with the type of business; loan amounts don't fit the investment need; some client feel they waste a lot of time in groups while others would like more time in their groups; and minimum balances in savings accounts are often too high, as is the cost of maintaining an account.
To address the situation, MFIs are increasingly investing in product development efforts, and several have argued the need for special products for persons with disabilities. According to the project, this would be a mistaken conclusion. Persons with disabilities are not a homogenous group; their businesses and their disabilities differ. Besides, the development and maintenance of special products will seldom turn out to be cost-efficient for the MFI. The project therefore highlights that inclusion requires no special conditions or tailored credit products. This has made it easier to gain MFIs' attention.
Even if the project argues that no special products are needed, it doesn't mean that developing products more closely aligned with the needs of vulnerable groups are not needed. The project argues that persons with disabilities can be used as a benchmark to indicate whether an MFI is inclusive in practice and whether its products are aligned with the needs of vulnerable groups. It is also proposed that if an MFI is able to design their services in such a manner that they are disability friendly, then the service will also be friendly to most other potential clients. Hence, learning to serve the disability market segment can enable an MFI to serve most other vulnerable market segments as well.
Few efforts in the project address the situation of exclusion because of physical and informational barriers. However, by simply putting the issue on the agenda, some MFIs have independently started to construct ramps, and new branches are increasingly made accessible for wheelchairs. In the training carried out by NUDIPU, interpretation into sign language is always provided, but still no information is for example translated into Braille.
The few efforts to address physical and informational barriers are partly a conscious decision. Ever since start-up, the main message from the project has been to begin with what's easiest. Therefore, those who are already in business, able to understand the information, and enter the premises as they are, constitute the initial target group.
Table 2 summarizes the exclusion mechanisms, their relative importance, and the major activities carried out in the project to reduce the barriers.
| Exclusion mechanism | Relative importance as experienced in the project | Major activities in the project to reduce the barriers |
|---|---|---|
| Exclusion stemming from low self-esteem | Very high | Training of entrepreneurial persons with disabilities on the aspects of business, microfinance and savings. Bridge-building between disability and microfinance 'communities' and the active use of role models. |
| Exclusion by other members | High/moderate | Lobbying efforts in the government, etc. Radio and TV talk shows. |
| Exclusion by staff | High | Training of MFI staff, particularly credit officers and the sensitization of MFI top management. Bridge-building between disability and microfinance "communities" and the active use of role models. |
| Exclusion by design | High/moderate | Promoting the idea of not developing special products for disabled clients, but to involve persons with disability in the design of new products tailored for the needs of vulnerable groups. |
| Exclusion because of physical and informational barriers | High/moderate | Motivating MFIs to independently make their premises more accessible and carry out outreach efforts in the disabled community. Lobbying towards MFIs, donors and authorities to make sure that all new branches are made accessible. |
The project does not impose systems upon the MFIs in order to measure the number of clients with disabilities served. This would have been an impossible task since disability is often not easily defined or measured. Besides, counting the number of clients with disabilities is not part of an MFI's core business, and it would therefore not have been a sign of real inclusion and mainstreaming. Instead the project has searched for alternative measurements to document its results. The active collection of qualitative data and success stories, and the monitoring of a selected number of MFI branches have become important alternatives.
The following story is one of more than 100 collected by the project:
The training gave me the motivation to join the women's SACCO in our village, but getting a group to identify with was a struggle since everybody was afraid of me because of my disability, and also given the fact that my husband too was disabled. Getting my first loan took another twist since many people doubted my capacity to manage it; they thought I was a bigger risk to them since the able-bodied were also failing to make timely repayments. I was subjected to a 15% extra savings on top of the mandatory 30% needed to qualify for a loan. I paid back the loan in a shorter period, which caused many women to realize that I was even better than most of them. I borrowed a second loan and this I used to expand my business to include foodstuffs, charcoal and firewood, which bring more regular income. My savings in the SACCO have increased to Ush.280,000 and members have trusted and appointed me to advise our loan committee. Now I no longer have to wait for my husband to provide for our family needs alone, but we contribute together and our children go to good schools. People respect me because now I use my own money to get what I want. Parents have started sending their daughters to me to be trained in knitting and tailoring because they believe I am a good example to women.- Mother of five from Mbarara district.
The story above illustrates that it is possible for persons with disabilities to access mainstream microfinance services and benefit from them. Information collected from the MFIs also indicates that it is possible to change the staff's attitude, as the following quotes illustrate:
In eight branches the managers have been asked to identify the number of clients with disabilities served before sensitization started (December 2005) and the number of clients with disabilities served today (December 2007). The project does not distinguish between savings and credit clients, both are considered equally important. Table 3 presents the results.
| Branch | Number of customers with disabilities, December 2005 |
Total number of customer with disabilities, December 2007 |
% increase in customers with disabilities during the period |
|---|---|---|---|
| Branch 1 | 6 | 19 | 217 |
| Branch 2 | 18 | 30 | 67 |
| Branch 3 | 30 | 50 | 67 |
| Branch 4 | 3 | 7 | 133 |
| Branch 5 | 4 | 12 | 200 |
| Branch 6 | 8 | 18 | 125 |
| Branch 7 | 2 | 9 | 350 |
| Branch 8 | 14 | 22 | 57 |
| Totals | 85 | 167 | 96 |
We observe in table 3 that all the MFIs had been serving clients with disabilities before the start-up of the project. Thus, the situation is not "all black,"as some observers tend to describe it. The second and most important impression is the considerable increase in the number of clients with disabilities served. An increase of 96% (82 clients) with the little effort invested, indicates that the project has found a cost-effective way of increasing the outreach of mainstream microfinance services to the persons with disabilities. We also observe that there is a considerable difference between the different branches, with the percentage increase varying from 57% to 350%. This difference probably indicates that local efforts can influence the results considerably.
If the eight branches randomly selected are representative of the 49 branches trained, the project may have contributed to reaching out to 500 new clients. However, during the last two years the MFIs have developed their customer base considerably. Table 4 indicates the relative change in clients with disabilities served.
| Branch | Total number of customers, December 2005 | Percentage customers with disabilities, December 2005 | Total number of new customers in the period | % of new customers that are persons with disabilities | % of total customers that are persons with disabilities, December 2007 |
|---|---|---|---|---|---|
| Branch 1 | 708 | 0.85 | 965 | 1.3 | 1.1 |
| Branch 2 | n/a | n/a | n/a | n/a | n/a |
| Branch 3 | 905 | 3.31 | 737 | 2.7 | 3.0 |
| Branch 4 | n/a | n/a | n/a | n/a | n/a |
| Branch 5 | 2710 | 0.15 | 1575 | 0.5 | 0.3 |
| Branch 6 | 2932 | 0.27 | 2136 | 0.5 | 0.4 |
| Branch 7 | 3278 | 0.06 | 1562 | 0.4 | 0.2 |
| Branch 8 | 2585 | 0.54 | 996 | 0.8 | 0.6 |
| Totals | 13118 | 0.65 | 7971 | 1.0 | 0.8 |
Table 4 indicates that before the sensitization, 6.5 out of 1000 clients had disabilities. After the sensitization, 10 out of 1000 new clients have disabilities, representing a 50% increase in the intake of clients with disabilities. Thus, of the nearly 100% increase reported in table 4, half seems to be natural growth while the other half may stem from the project's efforts. Interesting to note is the considerable difference between the percentage of clients with disabilities served in each branch, varying from 0.2% to 3% as of December 2007. This illustrates that local efforts really matter.
In addition to the results reported in tables 3 and 4, several MFIs have also indicated that they are installing wheelchair ramps. No statistics are kept, but probably more than a dozen MFI branches have now been equipped with wheelchair ramps, and MFI managers indicate that this will continue to be a priority.
Project costs are kept low. The total on-site costs in Uganda for the two-year period 2006 and 2007 are around $100,000. Since the project piggybacks on well-functioning organizations, the money is basically only for personal costs for the two project officers, logistical costs related to the trainings, and some overheads. In addition to the on-site costs, NAD has also covered costs related to the technical support and action research taking place in the project.
According to the project's staff, the following 10 lessons are the most important learned:
The results from the pilot project are promising. However, several questions remain unanswered. To stimulate further research, the following list of questions is provided:
This article reports from a project in Uganda where the aim is to mainstream entrepreneurial persons with disabilities into MFIs. Based on Simanowitz's (2001) theoretical framework of exclusion mechanisms, the barriers hindering the inclusion of persons with disabilities into MFIs have been identified, and the interventions taken on by the project to reduce these barriers have been described. Without special incentives to MFIs, special conditions for persons with disabilities, or special product design, the project has been able to increase the number of persons with disabilities served by MFIs. Thus, the project is cost-efficient and promising, and the lessons learned are probably useful in other contexts. However, the issue of the increased inclusion of persons with disabilities into mainstream microfinance is a Gordian knot that requires time to untie, which calls for long-term intervention and increased research efforts.