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DEVELOPMENT: Microcredit Summit Hopes to Kickstart MDGs

Haider Rizvi

UNITED NATIONS, Nov 3 2006 (IPS) - Hundreds of financial experts and activists are due to gather in the Canadian city of Halifax next weekend to explore new ways of helping the world’s rural poor with small business loans.

The four-day international meeting on microcredit from Nov. 12-15 is a near-culmination point in the first phase of a global campaign launched by the Nobel Peace Prize-winning Bangladeshi economist Muhammad Yunus some 10 years ago.

Disappointed with the attitude of commercial bankers toward the rural poor, in 1997, Yunus and others launched an ambitious worldwide campaign aimed at providing small loans to at least 100 million people, most of whom live in Asia.

The Microcredit Summit Campaign admits that it has failed to reach that goal, but participants note that 82 million people, mostly women, have already benefited from the campaign.

“We are a little bit short of that target,” campaign spokesperson Dalia Palchic told IPS. “But we are hopeful we will achieve our target by the end of next year.”

Palchic and other campaigners said the tiny loans helped 82 million people who survive on less than one dollar a day to start and expand small businesses, which also indirectly helped 410 million others.

With no collateral required, such loans average around 100 dollars and are often granted to those who are unable to read and write.

On Wednesday, the campaign released its annual report for 2006, citing the case of Balkisu Amadu, who owns a roadside food stand in Ghana. Amadu used to earn just 81 cents a day prior to receiving a small business loan over a year ago.

Today, she earns four dollars a day on average as a result of her participation in the Opportunity International Ghana Trust Bank, one of 3,100 institutions across the world that are associated with the campaign.

Regarding national level impact, activists point to Bangladesh as the world’s “most saturated microfinance market”, where more than 20 microfinance institutions have reached 21 million people.

Since 1976, Yunus’s Grameen Bank alone has extended micro-loans to over six million people. Activists claim that over the years, microfinancing has greatly helped in closing the gender gap in primary education.

“Bangladesh has already reached the Millennium Development Goal (MDG) on gender parity at the primary and secondary education levels,” said campaign director Sam Daley-Harris. “That is 11 years ahead of schedule.”

The MDGs include a 50 percent reduction in extreme poverty and hunger; universal primary education; reduction of child mortality by two-thirds; cutbacks in maternal mortality by three-quarters; the promotion of gender equality; and the reversal of the spread of HIV/AIDS, malaria and other diseases, all by 2015.

Citing a World Bank study, Daley-Harris said microfinance accounted for 40 percent of the “entire reduction” of moderate poverty in Bangladesh.

“We have been waiting for the researchers to document the positive impact of millions of micro-loans,” said Alex Counts, president of the Grameen Foundation, which supports microfinance partners in 22 countries.

“The rest of the world is catching up, but not quickly enough,” he added. “We are in a global poverty crisis.”

According to U.N. researchers, more than one billion people around the world live in dire poverty, while an equal number have no access to safe water and sanitation facilities.

The impact of small business loans on the lives of millions of impoverished people has not only brought praise for its practitioners, but has also caught the attention of those running the big banking industry.

“In the past they ignored the rural poor,” Palchick said of large commercial banks. “But now some of them have become interested. For example, Deutche and CitiBank have started their own microfinance sectors.”

Aside from its impact on the commercial sector, the campaign has also been successful in influencing the international discourse on development. Currently, various U.N. agencies as well as global financial institutions are working closely with the campaign.

“Microfinance services help poor people to overcome poverty themselves,” said Lennart Bage, head of the International Fund for Agricultural Development (IFAD), a U.N. agency that helps antipoverty projects in rural areas.

Bage, who is expected to lead one of the panels at the summit, added that microfinance “has proven especially effective in empowering women, who often make up the majority of clients for microfinance institutions.”

Like Bage, officials with the U.N. Development Programme (UNDP) and U.N. Capital Development Fund have expressed similar views on the role of microcredit in achieving development goals.

A day after the summit ends, a U.N.-led advisory group of experts will meet in Halifax to explore “innovative solutions to poverty” through improved access to credit and other financial services.

The group, comprising more than 20 representatives from governments, central banks, regulatory agencies, microfinance institutions, the private sector, civil society, donors, and academia, last met in New York this year in June.

The advisors are expected to hold a series of meetings in 2007 to highlight the significance of inclusive financing in poverty alleviation.

Campaigners said they plan to advance microcredit assistance to 175 million of the world’s poorest by 2015. The announcement will be made at the summit.

*Corrects the dates of the conference in the lead paragraph.