Microcredit schemes designed to help millions of the poorest
people throughout the world are in danger of running out of steam, experts warn, because
too much money is being thrown at them too quickly. Microfinance institutions offer loans
to people in developing countries who would not be able to get credit elsewhere to start
small businesses. There is now a fear, however, that they may have outgrown their
communities and could stop focusing their work on the poorest of the poor.
If growth occurs too quickly, or if the goal of expansion is put ahead
of sustainability, programmes may have more clients than they can serve effectively,
microcredit experts warned. There is a risk that the microcredit initiative to combat
poverty could be derailed by an indiscriminate flow of resources to programmes that are
not ready for rapid growth, experts argue.
100 MILLION FAMILIES
Last year's "Microcredit Summit" in Washington launched a
campaign to provide 100 million of the poorest families, especially women, with credit for
self-employment and other financial services by the year 2005.
Women account for over 900 million of the estimated 1.3 billion people
living in absolute poverty, and micro-financiers, such as the widely-imitated Grameen Bank
of Bangladesh, specifically set out to help them. Some 94 percent of Grameen's 1.8 million
borrowers are women. Muhammad Yunus, founder and managing director of the Grameen Bank
co-chair of the Micro-credit Summit Council of Practitioners, says that not enough people
will benefit if donors come up with too much money.
"The point is not to pour in so much
money that it kills the existing initiatives, but to help build more and more grass-root
organisations and create institutions and policies," said Yunus.
Albertine Gnanazan Hepie, Minister of Family and Women Promotion in the
Ivory Coast and a member of the campaign executive committee, said that there should be as
many microcredit institutions as possible if the majority of really destitute people are
to be helped. "Seventy per cent of women in the Ivory Coast are in the so-called
informal sector and do not yet have access to credit," she added.
Ismail Serageldin, vice-president for environmentally and socially
sustainable development at the World Bank and chair of the Consultative Group to Assist
the Poorest (CGAP), warned last month that "the (summit) figures are indicative
figures - the real issue is capacity building."
STRUCTURE, NOT MONEY
"We warn of the danger of measuring progress by how much money
is available for micro-finance, because if you do so you risk killing it. Mobilising money
is not the problem; the real problem is how to structure the system," said Serageldin
During the 1997 summit, the United Nations Development Programme
committed 40 million dollars over 18 months to a "Micro-start programme. Since then,
the African Development Bank freed up 21.5 million dollars over two years for micro
credits, and the International Fund for Agriculture has provided 130 million dollars
annually for micro-finance activities.
Twenty-nine bilateral and multilateral agencies have already joined the
microcredit council, and multilateral donors and U.N. agencies are devoting more and more
resources to micro credit programmes. The first meeting of Microcredit Summit's 15
Councils, made up of more than 2,250 institutions, was held in June 1998 in New York to
address common problems in reaching the summit's goals.
CUTTING POVERTY IN HALF
"The aim of reducing by half the number of the poorest
people, is achievable," says Winifred Pinger, co-chair of the Microcredit Summit
Council of Parliamentarians, "We find that very considerable progress has been
made , because more and more institutions have joined this campaign, including the
practitioners, those who actually have to do the job on the spot."
A United Nations General Assembly resolution on microcredit last
December called upon the international donor community to support the strengthening of
existing and emerging micro credit institutions.
The resolution also urged non-governmental organisations, the civil
society and the private sector to support and incorporate and related services in their
programmes for the eradication of poverty.
A survey of microcredit programmes released here says that, while
programmes are reporting significant progress in reaching greater numbers of clients,
there is still much work to be done in determining whether this growth represents an
increase in the number of the poorest families being served.
"We have surveyed the 1,150 practitioners
of the microcredit summit campaign, and it was found that the 458 who responded are now
reaching 8 million clients who are very poor," said Sam Daley-Harris,
Director of the micro credit summit campaign.
Of the remaining 92 million additional clients needed to reach the
summit's goal, it is estimated that 88 million will come from developing countries and 4
million from industrialised countries.
"The challenge that we are finding is
that we don't have simple, verifiable measurements to identify those who are among the
poorest in their community," said Daley-Harris.
To fill this gap, the summit has established a Poverty Measurement
Discussion Group to help identify poverty measurements intended to assist micro-finance
practitioners in identifying and reaching the poorest families.
"At the moment what you've got determines
whether you are creditworthy or not, and that's why (financial institutions) say that the
poor are not creditworthy," Yunus said.
Source : by Niccolo Samo TERRAVIVA monthly, published by North-South Centre of the Council of Europe and
inter-press service : April 1998, No: 16.
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