WOMENAID INTERNATIONAL

MICROCREDIT SUMMIT

INFORMATION PAPER

No: MC/IP.01

"Poor people are not a problem to be overcome. Rather, they are a
vital force whose productive potential must be unleashed."

Kofi Annan, United Nations Secretary-General in a message to the Microcredit Summit.

1.1 As a result of the visionary experiments started in the 1970s by Ela Bhatt, founder of SEWA in India and by Muhammad Yanus, founder of the Grameen Bank in Bangladesh, microcredit has spread to hundreds of financial institutions and microcredit banks, reaching about eight million people in developed and developing countries and handling billions of dollars a year. In February 1997 more than 3,000 practitioners of microcredit met in Washington for the first Microcredit Summit. Its agenda was to facilitate further development of personal and institutional commitments to the goal of reaching 100 million of the world's poorest families, especially the women of those families, with credit for self-employment and other financial and business services by 2005.

1.2 Approximately 40 commercial banks and lenders were represented at the Summit. Alberto S Bresh, President of Panama's Multi-Credit Bank, said he would raise his 1,700 micro-loan customers to 8,500. Mohua Mukherjee, Assistant General Manger of Citibank's Nairobi office, said her goal would be to reach one million Kenyans by the year 2005. Hillary Clinton who was the Summit's Honorary Co-Chair, announced that the US current budget would include $1 billion to be spent over five years on micro-enterprise as part of the Community Development Financial Institutions Fund.

1.3 At the Summit James Gustave Speth, the Administrator of the United Nations Development Programme (UNDP), announced an expansion of micro loan services with a new $41 million programme called 'MicroStart' to be jointly funded by the UNDP and donor nations, to which Finland made the first $1.1 million contribution. The MicroStart Programme will operate in 25 of UNDP's 132 country offices. Each office will sponsor five to ten microcredit programmes, some new and others expanding. UNDP will not only provide money to capitalise loans, hire staff and cover operational costs, but it has contracted 36 international organisations with micro credit experience to provide technical guidance.

"From this day on you are a vocal and powerful force which brings together a new constituency, both private and public, committed to a great enterprise with profound ramifications."

James Gustave Speth, Administrator, UNDP at the Microcredit Summit.

1.4 However microcredit in itself is not a panacea. Credit needs to be considered within a microfinance paradigm. Business training, housing finance, insurance, secure savings facilities are all part of social development strategies which need to be fully integrated within a national policy framework. Any poverty reduction strategy requires a co-ordinated approach if core constraints on the ability of people to work their way out of poverty are to be removed.

'We have learned that access to credit allows women to lift themselves out of poverty, powerlessness and vulnerability. But we have also learned that women's problems are not only economic but social and political. For even as many women gained access to credit institutions, we saw that all too often their loans were being controlled and directly invested by male relatives. . . One of the critical challenges that still faces us is to help women's organisations grow stronger and encourage enterprise networks so that women can take full control of their economic resources. We want to alter bargaining relationships in the home, community and market place and advocate for economic policies which support women's livelihood."  

Noeleen Heyzer, Director Unifem at Microcredit Summit (MCS 2005, UK News, April 1997).

1.5 The Summit Report, The Earth Times, comments "As potent a device as microcredit appears to be, the question remains. After the loan, what next? Will governments and the private sector reinforce and complement microcredit success with deeper investments in social infrastructure?"

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