Having worked alongside women from many different backgrounds and ethnicities for almost 20 years in urban UK settings, it became clear to me that women often struggle with money. Not because of any individual failing, but because of the way societies are structured. Banks distrust women because they may lack collateral and have no material possessions in their own names to back a loan.

However, women seldom display any shortage of tenacity, enthusiasm, emotional intelligence or dependability regarding regular repayment of money borrowed. I know this from my PhD thesis  – ‘It’s not cold money, it’s warm money: Microcredit and empowerment in the case of the New Zealand Women’s Loan Fund’. I always wanted the challenge of charting the possibility of giving small loans to women from within their own communities – away from the grand, complicated, and sometimes overwhelming level of mainstream banking. My research, including extensive interviews in seven New Zealand sites, showed me in detail how this can be done.

Over the last 30 years, microcredit has been held up as a magic bullet to cure poverty worldwide. The fact is that it is not a suitable vehicle to solve this problem because it cannot be scaled up successfully. On the contrary, microcredit works for many women if it is kept small-scale, friendly, unassuming, local and above all, interest-free. It works well when run by knowledgeable local women who understand their communities, can respond swiftly to requests for help, and have a strong commitment to helping those less fortunate than themselves – qualities which I discovered throughout my research work in both islands of New Zealand.

On the contrary, microcredit works for many women if it is kept small-scale, friendly, unassuming, local and above all, interest-free.

The Women’s Loan Fund (WLF) presents an alternative economic model, which deserves more recognition than it has received to date. A simple handbook written by the founding women of the first scheme in Wellington in the late 90’s explains how to set up such a fund. Establishing a money-go-round principle and ensuring that the loans have no interest attached is vital. Microcredit is not at any stage a market-based project, a money-making exercise or a Ponzi Scheme. It exists strictly to underpin and support those who cannot borrow easily from a mainstream source of money.

New Zealand is known as a crucible for new ideas and also for providing a testing ground for new products. The WLF microcredit operation relies on trust, relationships and a quick turnaround in response to requests for help. Women who want to borrow are engaged with, and listened to. Two women trustees interview each prospective borrower, who also gets help to fill in the simple forms. The WLF makes a point of being non-judgmental and aims to understand what a woman really wants to do with the money – whether it be generating income, further study, replacing the brakes on her car, getting a state of the art hearing aid, having her nose or teeth fixed or sending a child on a school trip.

Above all, there is a principle of reciprocity. The loan is to be repaid over 12 months, and there are very few women who default. As the timings of the different loans and repayments are staggered, a money-go-round is created and there is always money in the pot. Loans average between $NZ500 and $NZ1000, and the borrower can repay, either from welfare benefits or from regular income. If they get into difficulties, they are urged to contact the WLF and new timescales and repayment dates are negotiated.

Unlike many microcredit projects in the developed world, the WLF is a group with an alternative structure and a different philosophy. It does not prioritise economic empowerment, but rather sees empowerment as an evolving, and relational, project for individual women, in which the emotional element plays a pivotal role. Encouragement is a vital factor and when a woman is within sight of repaying a loan she is usually sent a congratulatory note acknowledging her achievement – an aspect often mentioned by the borrowers when I talked to them. In addition, emphasising the fact that repaying their loan back on time makes more money available for other women also heightened their feelings of self-worth and ‘belonging’ to the organisation. 

It does not prioritise economic empowerment, but rather sees empowerment as an evolving, and relational, project for individual women, in which the emotional element plays a pivotal role.

Overall, I identified six features of what I called ‘emotional empowerment’, which are directly tied to the operation and success of the WLF: trust; respect; appreciation; belonging; being comfortable and at ease; and confidence and self-belief. It was clear that as a result of these emotional factors, most borrowers were much happier dealing with the WLF, than with the banks.

In the South Island of New Zealand, everyone who puts money into a WLF branch, either by donation or repaying loans is known as an ‘Angel’. Women paying back loans are excited to see themselves as ‘Angels’ and this fully reflects the ethos of the organisation that provides ‘warm money, not cold money’.

To get in touch with the author, or to request a copy of the thesis, please contact Dr Suzy Marsh.