Women's World Bank Head Mary Iskenderian: 'Men Are Programmed to Take More Risk'

SPIEGEL ONLINE: Ms. Iskenderian, banks and financial institutions across the globe are suffering from the financial crisis. But the banks you represent are not. Why is that?

Iskenderian: Micro-finance institutions are being very careful. In the past, loan renewals were common and easily done. We're now making sure that institutions are being careful with renewal of credit but for the most part, portfolio quality is good.

SPIEGEL ONLINE: So you really haven't felt the effects of the crisis?

Iskenderian: Where we are seeing an impact is constraints on credit and the ability of institutions to raise money and continue to finance growth. There is still dollar and euro denominated funding available. But what has completely dried up is local currency financing. My organization is trying to provide loan guarantees to institutions so that they can borrow from local banks.

SPIEGEL ONLINE: Don't the banks have equity reserves to help them get around such shortages?

Iskenderian: Up until now most micro-finance institutions haven't really seen savings as a source of funding. It's been a product that they offer clients who are eager to find a safe place to save their money with an institution they trust but not as a source of financing. Where we are quite active with our members is designing savings products. Very small deposits that come in and out of the bank several times a month are very expensive. You need longer term savings with growing balances to make it worthwhile for the institution to offer this kind of product.

SPIEGEL ONLINE: In the developing world, women are being especially hard hit by the crisis -- and yet those who ultimately caused the crisis were primarily men. Would the financial crisis have happened if more women worked in the financial markets?

Iskenderian: There's such a body of literature and research now looking at better decisions being made by more diverse groups of people around the table. Men are almost hormonally programmed to take more risk which is great in boom cycles and they're going to have outsized returns, but women are going to provide much more stable returns over a period of time. I've been in so many groups where, when you have a critical mass of either women or persons of color or something other than the dominant white male hierarchy, you just get another take on the subject.

SPIEGEL ONLINE: Most of the loans you make are to women. Why is that?

Iskenderian: Women are the entry point to the rest of the family. When you empower a woman economically, and she's able to invest in a business, the ways she re-invests the proceeds are the same everywhere: the education of her children, the healthcare of her family and her housing. These are the long-term intergenerational benefits that the whole household benefits from.

SPIEGEL ONLINE: And it wouldn't work if you gave out the loans to men?

Iskenderian: I hesitate to get into the "men are bad women are good" discussion. What happens is a division of labor or priorities. The women re-invest back into the family, household and children and the men will re-invest back into their businesses so their businesses tend to develop faster. If all of that stays within the household, it can be positive. Unfortunately, what we often see is that a lot of the money men generate gets siphoned off. I saw a back-of-the-envelope calculation that something like 20 cents of every dollar in a low-income household is spent on gambling, prostitution, alcohol and sugary soft drinks. And you probably know which member of the family is spending money in that way.

SPIEGEL ONLINE: If the micro-credit model is so successful, why don't normal banks begin offering them? Is it really so different from their core business?

Iskenderian: There's a growing interest in banks to think about how they can reach this population -- in many countries the low income segments are the only ones that are growing as markets. So they're quite eager. But their cost structures make it very difficult for to make very small loans. Our average loan size is just over $500 and best practice for a micro-finance institution is 450 clients per loan officer, which is unheard of in banking. We charge interest in the 30 percent to 40 percent range -- to cover operating costs. It's a very expensive business because there is so much focus on the client and knowing their household dynamic.

SPIEGEL ONLINE: The financial crisis has made it more difficult to access credit in the developed world. Could micro-finance be a useful model?

Iskenderian: We are being inundated with requests. And some members of my board are urging us to look at the US. But there's still a great deal of access to credit and, so far, micro-finance has not been successful in the US. There are some developed countries that have had more success, Spain for example. And there has been some success, even in the US, is going into ethnic communities. But, and I don't mean to sound pessimistic, where there is still access to credit, it's hard for micro-finance to make many inroads.