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8/9/2019 Empowerment of Women Through Microfinance
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Definition:
The definition of microfinance, which has its roots in micro credit, has evolved in recent
decades. Microfinance, today, refers to small savings, credit and insurance services
extended to socially and economically disadvantaged segments of society and is
emerging as a powerful tool for poverty alleviation.
According to the United Nations, microfinance institutions can be broadly defined as
provider of small-scale financial services such as savings, credit and other basic financial
services to poor and low-income people. The term microfinance institution now refers to
a wide range of organizations dedicated to providing these services and includes NGOs,
credit unions, co-operatives, private commercial banks, NBFCs and parts of state-owned
banks.
Access to financial services has been recognized as a human right. Strengthening credit
delivery services and increasing their outreach has always been an important component
of Indian development strategy. A large proportion of the poor have always been out of
reach of formal banking facilities and both the market and the government have failed to
provide credit services access to the poor. It was the failure of these formal procedures
and systems that necessitated the birth of microfinance institutions.
Microfinance programs sometimes also provide skill based training and education to
enhance productivity and operational efficiency among those who avail micro loans.
History of Microfinance:
The history of microfinance started in the 1800s with theorist Lysander Spooner.
However, it was at the end of World War 2, that the concept began to have major impact,
with the creation of the Marshall Plan.
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1983: Prof. Yunus creates Grameen Bank. To date, Grameen has lent more than $6
billion (to 7.4 million Bangladeshis). Its methods have become the basis for modern
microfinance that includes group lending, women-focused, and good repayment rates.
1992: ACCION helps found BancoSol, a microfinance institution in Bolivia as a
nonprofit organization.
1997: The National Microfinance Bank in Tanzania (NMB) is created. Meanwhile,
Deutsche Bank enters microfinance as part of its drive to embrace social investing. And,
Grameen Foundation is founded in the US.
2000: Banco Sol in Bolivia becomes the first regulated bank in the world that is solely
dedicated to microfinance.
2001: The Microenterprise Access to Banking Services initiative in the Philippines helps
integrate rural banks microfinance loan clients into the credit system.
2005: The UN names 2005 the International Year of Microcredit. Citibank opens Citi
Microfinance, based in London, New York , India and Colombia to broaden the reach of
its financial services.
2006:
* The Microfinance Summit Campaign Report estimates that there are more than 3,000
microfinance institutions serving 106 million poor people in developing countries. The
total cash turnover of these institutions worldwide is estimated at $2.5bn.
* Prof. Yunus is awarded the Nobel Peace Prize
* Barclays Launches Ghanaian Microfinance, tapping into one of Africas most ancient
forms of banking, Susu collection.
* International Finance Corporation, part of the World Bank, announces a $45m
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investment in credit-linked notes to be issued via Standard Chartered bank to facilitate
microfinance lending in Africa and Asia.
2008: Microfinance continues going mainstream. Retail investors/lenders participate in
Kiva.org and MicroPlace.org that allows individuals to invest in small loans to
microfinance clients directly online.
Objective:
The main objective of microfinance is financial inclusion. Financial inclusion or inclusive
finance is the delivery of financial services at affordable costs to sections of
disadvantaged and low-income segments of society.
The Economic and Social Council of the United Nations, in a move to build the
entrepreneurial spirit of the poor, worldwide, proclaimed the year 2005 as the
International Year Of Microfinance.
The International year of Microcredit consists of five goals:
1. Assess and promote the contribution of microfinance to the MFIs
2. Make microfinance more visible for public awareness und understanding as a
very important part of the development situation
3. The promotion should be inclusive the financial sector
4. Make a supporting system for sustainable access to financial services
5. Support strategic partnerships by encouraging new partnerships and innovation to
build and expand the outreach and success of microfinance for all
Evolution of modern microfinance:
Prof. Muhammad Yunus was awarded the Nobel Peace Prize in 2006 for his efforts in
alleviation of the status of poor and his work in the spread of formal modern
microfinance.
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Since then, microcredit programs throughout the world have improved upon the original
methodologies and defied conventional wisdom about financing the poor. First, they
showed that poor people, especially women, had excellent repayment rates among the
better programs, rates that were better than the formal financial sectors of most
developing countries. Second, the poor were willing and able to pay interest rates that
allowed microfinance institutions (MFIs) to cover their costs.Recently, there have been a
slew of innovations in the microfinance sector. Some innovations include:
1. ICICI Bank (India): Two state banks in India (Corporation and Canara)
partnered with an NGO to provide salaried low-income workers with access to
savings. The project uses the already established automatic teller machines(ATMs) in the factories to offer a recurring savings product, along with education
on personal finance
2. BASIX in Indiareduced transportation and transaction costs for its clients and
decreased staff expenses by establishing tellers in manned phone booths operating
in India. The company operating the phone booths receives a service fee and
phone booth operators are being trained in basic collection operations and
accounting. BASIX is currently redesigning the project after the pilot and
preparing it for re-launching.
3. The international NGO Technoservehas developed an inventory credit scheme
in Ghana that enables farmers' groups to obtain higher value for their crops by
providing post-harvest credit through linkage with a rural financial institution.
Instead of selling all of their crop at harvest - when prices are lowest - in order to
meet cash needs, small-scale farmers in the scheme store their crop in a
cooperatively-managed warehouse and receive a loan of about 75-80% of the
value of the stored crop, which serves as collateral. This loan permits them to
clear their accumulated debts and satisfy immediate cash requirements. Then,
when prices have risen in the off-season, the farmers either sell the stored crop or
redeem it for home consumption.
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Microfinance in India:
1. SHG Bank Linkage Model:
SHGs are a manner of cooperative credit societies that are linked to a commercial
bank instead of a cooperative bank. The SHGs are then given access to pooled
savings for disbursement to members. An SHG selects its leader on a rotation
basis and the members also appoint a treasurer. Minutes of each meeting are
recorded, along with all receipts of savings and disbursement of loans. High
repayment rate has encouraged banks to institutionalize SHGs under the bank-
SHG linkage model.
2. MFI Model:
Microfinance Institutions form SHGs and finance them by obtaining resource
support from various channels. In India, majority of micro credit activity is under
the Banking model (NABARDs Bank-SHG Linkage) and 10-15% of the
activity is through MFI model
SHGs emerged as a component of the Indian financial system after 1996. They are small,
informal and homogenous groups of not more than 20 members each. The size of 20 has
been made mandatory because any group larger that this has to be registered under the
Indian Societies Registration Act.
Empowerment:
Empowerment literally means making someone powerful; facilitating the weak to attain
strength, enabling someone to confront injustice and oppression. Empowerment is a
process, which makes the powerless to acquire and control over power through
awareness, capacity building, participation in decision making, acquiring information,
attaining confidence and self-employment
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One must be clear about the notion of empowerment, with the concept of gender,
ideology and power. Empowerment is defined as the process and it results in a situation
where the powerless or less powerful members of society gain greater control and access
over material resources and knowledge and challenge the ideologies that justify the
unequal distribution. Empowerment is displayed through a change in the balance of
power in terms of ways of thinking, or distribution of resources. It is hence a process by
which an individual gains control over intellectual and material resources to challenge
and change the prevailing ideologies and the structures of society.
It has also been linked to terms such as self-direction, agency, liberation, autonomy, self-
determination, life of dignity in accordance with ones values, capacity to fight for ones
rights, independence, own decision making, being free, awakening, self-strength,
capability participation, control, own choice, self-confidence and mobilization
All these definitions however, contain the idea that empowerment is about making
personal change, changing the perception of the community and improving capabilities to
formulate strategic choices for ones life.
The underlying assumption of empowerment through microfinance is that people caneffectively strategize ways to get out of poverty if they have direct access to economic
resources and are able to employ them in meaningful ways.
Microfinance and Women:
Empowerment is about the ability to make strategic life choices, and constitutes three
dimensions: resources (defined broadly to include not only access, but also future claimsto material, human and social resources); agency (including processes of decision-making
and less-measurable manifestations of agency such as negotiation, deception and
manipulation); and achievements (well-being outcomes).
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Empowerment and education increase self-confidence and the organizational and mental
abilities of any individual. Women experience an increase in their decision-making areas
both in family life, as well as financial aspects, which were traditionally male-dominated.
The empowerment of women through microfinance is measured in terms of the following
three aspects:
1. Economic empowerment: When the woman of a household is given the power to
make economic decisions, they tend to optimize their own as well as the
households welfare. Thus, investment in womens economic pursuits tend to
have a percolating effect and equate to an investment in the entire family unit.
Economic empowerment emphasizes a womans own income generatingactivities, and there is more emphasis on increasing incomes at the household
level and use of loans for consumption. Individual economic empowerment of a
woman is seen as dependent of social and political empowerment.
2. Increased wellbeing: Control of financial, credit and savings decisions increases a
womans say in economic decisions of the household. This enables women to
increase the expenditure on overall wellbeing of the family, with specific focus on
themselves and their children. This also prevents the money of the family from
being utilized in harmful or detrimental avenues and leaking the income of the
household. Improved wellbeing is therefore an assumed outcome from increasing
a womans economic activities and incomes.
3. Political and social empowerment: A womens status within the community is
enhanced with her increased control over financial and economic matters. The
creation of groups enhances the power of social and political movements
organized by them. Social standing is escalated with regard to decision making
and implementation.
Microfinance institutions around the world have found a variety of ways and developed
multiple products and services that help overcome the barriers that have traditionally kept
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women from having access to financial services. These are requirements such as
collateral, male or salaried guarantor requirements, documentation requirements, cultural
barriers, limited mobility, and literacy. The major reasons for microfinance institutions
and the banks, which encourage the targeting of women, include:
1. Gender Equality for Development:
Research done by UNDP, UNIFEM, and the World Bank, among others, indicate
that gender inequalities in developing societies inhibit economic growth and
development. For example, a World Bank report confirms that societies that
discriminate on the basis of gender pay the cost of greater poverty, slower
economic growth, weaker governance, and a lower living standard of their people.
The UNDP found a very strong correlation between its gender empowermentmeasure and gender-related development indices and its Human Development
Index. Overall, evidence is mounting that improved gender equality is a critical
component of any development strategy. By giving women access to working
capital and training, microfinance helps mobilize womens productive capacity to
alleviate poverty and maximize economic output.
2. Women are the Poorest of the Poor:
It is generally accepted that women are disproportionately represented among theworlds poorest people. According to the World Banks gender statistics database,
women have a higher unemployment rate than men in virtually every country. In
general, women also make up the majority of the lower paid, unorganized
informal sector of most economies. These statistics are used to justify giving
priority to increasing womens access to financial services on the grounds that
women are relatively more disadvantaged than men.
3. Women spending on their Families:Women have been shown to spend more of their income on their households;
therefore, when women are helped to increase their incomes, the welfare of the
whole family is improved as women have a greater tendency to spend on their
childrens health, education and overall welfare of the family. A womans success
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benefits more than one person. Assisting women therefore generates a multiplier
effect that enlarges the impact of the institutions activities.
4. Efficiency and Sustainability:
Proponents of targeting women on the grounds of sustainability cite womens
repayment records and cooperativeness. A collective wisdom has emerged that
womens repayment rates are typically far superior to those of men. Lower arrears
and loan loss rates have an important effect on the efficiency and sustainability of
the institution. Many programs have also found women to be more cooperative
and prefer to work with them for that reason as well.
5. Women's Rights Perspective:
Women's equal access to financial resources is a human rights issue. Because
access to credit is an important mechanism for reducing women's poverty and
access to credit has been recognized as a basic human right, it has been an explicit
focus of a variety of human rights instruments.
6. Empowering Women:
Last, but not least, one of the often articulated rationales for supporting
microfinance and the targeting of women by microfinance programs is that
microfinance is an effective means or entry point for empowering women. By
putting financial resources in the hands of women, microfinance institutions help
level the playing field and promote gender equality.
IMPACT OF WOMEN EMPOWERMENT
1. Impact on Decision Making:
Womens ability to influence or make decisions that affect their lives and their
futures is considered to be one of the principal components of empowerment by
most scholars. It is much less clear, however, what types of decisions and what
degree of influence should be classified as empowerment in different contexts.
The Womens Empowerment Program in Nepal, for example, conducted a study
that showed an average of 89,000 out of 130,000 or 68 percent of women in its
program experienced an increase in their decision-making roles in the areas of
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family planning, childrens marriage, buying and selling property, and sending
their daughters to schoolall areas of decision making traditionally dominated by
men.
2. Impact on Self-Confidence:Self-confidence is one of the most crucial areas of change for empowerment, yet
it is also one of the most difficult to measure or assess. Self-confidence is a
complex concept relating to both womens perception of their capabilities and
their actual level of skills and capabilities. It is related to Kabeers concept of
agency that allows women to define and achieve goals as well as the sense of
power women have within themselves.
3. Impact on Family Relationships and Domestic Violence:Although there have been a few studies that have asserted that womens
participation in microfinance leads to an increase in domestic violence, most
practitioners have reported the opposite experience. Microfinance programs
strengthen womens economic autonomy and give them the means to pursue non-
traditional activities. In some cases, women who begin to assert themselves and
their opinions in their households incur the wrath of angry husbands who feel
their authority and sometimes their reputations are being threatened by their
wives behaviour. Other way round many practitioners have found that family
relationships can be strengthened when the home becomes a more comfortable
place to be, and when each member of the family feels secure in his or her ability
to contribute productively to the family.
4. Impact on Womens Involvement and Status in theCommunity:
Several microfinance and microenterprise support programs have observed
improvements in womens status in their communities. Contributing financial
resources to the family or community confers greater legitimacy and value to
womens views and gives them more entitlements than they would otherwise
have. Studies of microfinance clients from various institutions around the world
show that the women themselves very often perceive that they receive more
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respect from their families and their communities particularly from the male
membersthan they did before joining a microfinance program.
5. Impact on Political Empowerment of Women and Womens Rights:
Widespread political empowerment is a fairly rare outcome of most microfinance
programs. Microfinance programs offer services and products that can enhance
individual womens abilities to participate effectively in politics. Nevertheless,
many examples testify that womens participation in lending centers and groups
increases their knowledge of political parties, processes, and channels of
influence. Women clients of Opportunity Microfinance Bank in the Philippines
have gained leadership experience and confidence as leaders of their Trust Banks
and have gone on to be elected as leaders within their barangays.
Review of Literature
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Longwe and Clarke (1994)explained women empowerment as an on going cyclical
process having five stages. The first stage is welfare stage and at this stage the womens
resources are not fully recognized and met. The second is access stage, where women
recognize it and take action to gain access to these resources. The third stage is the
awareness level stage, where women realize that their lack of access to resources and
their general subordinate status are due to socially constructed beliefs and phenomena.
The fourth stage is the participation level stage, where women become actively involved
in decision-making processes within their households, communities and societies. The
final stage is control stage; in which women get control over access to resources and
distribution of benefits by increasing their participation. This control increases womens
power and respect within their households, communities and societies at large.
According to Pillai (1995), women empowerment is an active, multidimensional
process, which enables women to realise their full identity and powers in all spheres of
life. Power is neither a commodity to be transacted nor can it be given away as alms.
Power has to be acquired and once acquired it needs to be exercised, sustained and
preserved.
Stromquist (1995) wrote that empowerment includes both cognitive and psychological
elements. It involves womens understanding of their conditions of subordination and
the causes of such conditions at both micro and macro levels of society. It involves
understanding the self and the need to make choices that may go against cultural and
social expectations.
Kabeer (1999)explained that womens empowerment refers to the process by which
those who have been denied the ability to make strategic life choices, acquire such
ability. The ability to exercise choices incorporates three inter-related dimensions:
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Resources, which include access as well as future claims to both material and social
resources; Agency, which includes the process of decision-making, negotiation,
deception and manipulation; and Achievements, which refers to the well-being outcomes
of choice.
Kabeer (2001)has shown that there are two essential elements of women empowerment,
i.e., process and agency. A process is defined as the series of events that produce gradual
change. The process of women empowerment leads to expansion in their ability to have
resources and to make strategic life choices. The agency element of women
empowerment describes that women themselves are the significant actors in the process
of change. It is the process through which choices are made. Empowerment cannot be
offered by a third party; rather, it has to be claimed by those who would become
empowered.
Kalpana (2008)has shown the diversity of bypass strategies implemented by women
(arrangements with the staff and with bankers, use of intermediaries, etc.) to do as if
they were using microcredit for productive use. The motivation there was to access
credit rather than to redefine the uses to which it was put as productive. But definitely
that is a reflection of womens capacity to negotiate access to resources and use them for
their livelihood promotion.
Sengupta and Aubuchon (2008) have focused on achievement made by Prof.
Muhammad Yunus and the Grameen Bank for their efforts to create economic and social
development from below. Their article was intended as a non- technical overview on the
growth and development of microcredit and microfinance. The Grameen bank and its
achievement were reviewed. The paper also emphasized on the group-lending mode of
granting microfinance and its benefit and reviewed the modes and methods of
microfinance in different economies and its future.
Mummidi (2009) discussed in her paper that women should be entitled to work with the
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utilization of resources provided to them through microfinance institutions. Along with
this, the efficiency of utilization of these resources has also been discussed. The paper
suggests that a better understanding of the diversity of womens livelihood and a better
understanding of the range of constraints, motivations, skills and capabilities of women
through the livelihood framework might help to understand the impact of microfinance.
The limitation, however, lies in the broad scope of this framework making it difficult to
operationalize. This paper was a narrow demonstration of this difficult possibility.
Pillai and Nadarajan (2010) in their paper provided evidence about Microfinance being
a powerful tool to alleviate poverty and empowering rural women and also in bringing
social and economic changes in the rural India. Microfinance and self-help groups were
found to be successful in promoting empowerment of women leading to development.
Their paper analyzed the impact of microfinance on the empowerment of SHG leaders in
psychological, economic, social aspects, managerial skills and their attitudes in the
Kanyakumari Disrtict.
Devaraja (2011) has described the evolution of the Microfinance revolution in India. The
study stated that the outreach of such activities has been low along with the question
mark on the profitability and sustainability of MFIs. This paper defined the three distinctaspects where government needs to play a significant role. The first was to protect the
rights of the micro-borrower. The second was that of prudential oversight of risk-taking
by firms operating in microfinance. The third was a developmental role, emphasizing
scale-up of the microfinance industry where the key issues are diversification of access to
funds, innovations in distribution and product structure, and the use of new technologies
such as credit bureaus and the UID. He also suggested having proper regulation
mechanism for the microfinance industry.
Mamun and Adaikalam (2011) investigated the effect of Amanah Ikhtiar Malaysias
(AIM) Urban Microfinance Program on their clients quality of life in Peninsular
Malaysia. This study employed a cross sectional design with stratified random sampling
method. A quality of life index using eleven selected indicators was developed. Findings
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of this study extend the literature by providing empirical evidence that access to
microfinance improved quality of life of participating households in urban Peninsular
Malaysia. The findings showed that the respondents participation status is associated
with the size and quality of clients houses. It was recommended that AIM should focus
on increasing the outreach by targeting low income clients in urban Peninsular
Malaysia. Moreover it should also review and re-organize their programs in order to
present a dynamic and well- diversified microfinance program that fulfills the financial
needs of their urban clients.
Amin and Patel (2012) stated that in any developing economy contribution of villages or
the ruler segment is essential. As per the author, to improve efficiency at this level in
developing economy maximum weight age should be given to financial institution. Now
days through Self Help Group such targeted population is provided financial help for
economic upliftment and also for betterment of the poor people. T o have faster
development of any segment contribution of the woman is essential. In India, 48%
population is of woman and literacy ratio of woman is 54.16%, but still their contribution
in the economy is very negligible. Micro finance institutes play the most significant role
to provide woman empowerment in to the Indian economy. Such foundation not only
gives them empowerment with finance only but also revolutionizes their social, cultural
and behavioral pattern, which is helpful for development of the economy.
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Statement of the problem:
Earlier, women were stopped from taking part in any social or economic activity and
never given an active role in decision making. This social situation was only heightened
in rural areas. However, with the concepts of empowerment and education of women, and
provision of microfinance to this, this social structure is starting to see change. NGOs
and financial institutions have seen that women are the smallest source of credit risk and
the most favorable bet when it comes to generating income from activities engaged in by
availing microcredit. This has induced research to focus on empowerment of urban
women who participate in microfinance.
Objective of the study:
- To outline the various benefits experienced by women who have availed
microfinance and created their own businesses
- To determine degree of penetration of microfinance to women
- To trace out the problems in provision of microfinance and provide possible
solutions to the same
Research Methodology:
This research is based on descriptive research method. The study is based on thesecondary data so descriptive research method is suitable for this study.
Secondary data is used for the research. This study is not based on the primary
data so there is no requirement for sampling techniques. Secondary data from various
microfinance related websites and research articles are being used for this study.
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Limitations of the study:
The main problems in measuring the degree of empowerment of women are:
The measurement of women empowerment involves both quantitative as well as
qualitative data such as access to financial resources, participation in household decision-
making, change in the level of self-confidence, self-esteem, level of spatial mobility,
level of awareness etc. The qualitative indicators of empowerment are difficult to
measure.
Empowerment is an ongoing process and to measure the changes in a process, data is to
be collected for at least two points in time. But this method is further restricted as it is
difficult to decide the time gap over which the changes are to be measured because some
signs of empowerment can be seen in a short time period of 2 to 3 years while for others
a longer time period may be required. There may be a shift in the relevance of
empowerment indicators over time. Also, more time and resources are required to
measure the impact.
PROBLEM AND CHALLENGES
Previous research and studies have shown that many factors are involved in increasing
the difficulty for women empowerment through microfinance and micro businesses.
These include:
- Lack of knowledge and training
-Inadequate book-keeping
- Lack of capital
- High interest rates
- Employment of too many relatives which increases social pressure to share
benefits
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- Credit policies that can gradually ruin their business (many customers cannot pay
cash; on the other hand, suppliers are very harsh towards women).
- Inventory and inflation accounting is disregarded
Other shortcomings include:
1. Burden of meeting: Time consuming meetings, in particular in programmes based
on group lending, and time consuming income generating activities without reduction
of traditional responsibilities increase womens work and time burden.
2. New Pressures: By using social capital, in-group lending/group collateral
programmes, additional stresses and pressures are introduced, which might increase
vulnerability and reflect disempowerment.
4. Reinforcement of traditional gender roles: Lack of economic empowerment:
Micro finance assists women to perform traditional roles better and women thus
remain trapped in low productivity sectors, not moving from the group of survival
enterprises to micro-enterprises. There is evidence of men withdrawing their
contributions to certain types of household expenditures.
Urban Poor Statistics:
Indias population 1.1 billionUrban population 352 million (32% of total population)
Urban poor 106 Million (30% of urban population)
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Reasons for borrowing by urban poor:
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Chapter 1: Introduction
Chapter 2: Review of Literature
Chapter 3: Research Methodology
Chapter 4: Analysis and Interpretation
Chapter 5: Findings, Suggestions and Conclusion
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