The UN year of microcredit
Microcredit and microfinance are primary forms of finance that pull tens of thousands out of deep poverty each year.

by John William

“It could be for a new tool, a machine, or a shop in the marketplace – millions of the world’s poor and low-income people have taken advantage of small loans to improve their lives. Over the past three decades, people have used these loans ... to launch new enterprises, create jobs and help economies to flourish.”
– UN Department of Public Information

Challenging the myth that poor people need charity, microcredit systems have lent over Cdn $9 billion to more than 13 million borrowers and have repayment rates of 97 percent, rates better than many banks achieve in Canada lending to Canadians. While the interest rates charged for these loans can seem high to those used to fairly stable financial lives, they are overwhelmingly less than charged by local, informal moneylenders. Further, studies conducted in India, Kenya and the Philippines found that “the average annual return on investments by microbusinesses ranged from 117 to 847 percent.”
All borrowers also know that for microcredit to work, the rates must be high enough to provide viable, long-term financial services on a large scale, a scale large enough to ensure the continuation of the service for their own, and others, future needs.
Who are the people they reach? In Africa, women are more than “60 percent of the rural labour force and contribute up to 80 percent of food production, yet receive less than 10 percent of credit provided to farmers.” (Women and the Agricultural Sector by Chana Majake, chief executive officer, Commission on Gender Equality, South Africa.)
Money from the big institutional lenders (the World Bank, the IMF and others) is likely reaching inappropriate hands in the agricultural sector. With microcredit, most of the borrowers are women-led businesses and co-operatives.
How does reaching women help? Outside, independent sources of income tends to help reduce the economic dependency of women on husbands, helps them become more assertive of their rights, and can help make men accept financial consultation from spouses. Aside from the obvious assistance to otherwise less-empowered women, a micro-survey in Tanzania by Beegle, Dehejia and Gatti, also found that “access at the household level to credit acts as a substitute for child labour.” This increase in local economies also pushes down the need for ever more children to support parents in infirmity or old age.
Fortunata Maria de Aliaga has sold flowers from a street corner in La Paz, Bolivia for decades. To give her children the chance to go to school, she worked long days for little pay. Some days she did not even have enough money to buy flowers to sell.
Then, nearly 20 years ago, Fortunata learned about Banco Sol, a bank affiliated with Accion International, a microfinance organization. Together with three other women she qualified for a loan that allowed her to buy flowers in bulk at a much cheaper rate than she could previously. As she repaid each loan, she qualified for bigger ones. Today, she is proud of putting her savings to good use. “All three of my children finished school.”
Declaring 2005 the Year of Microcredit, UN General Secretary Kofi Annan said “Sustainable access to microfinance helps alleviate poverty by generating income, creating jobs, allowing children to go to school, enabling families to obtain health care, and empowering people to make the choices that best serve their needs.”

You can find out much more about the UN Year of Microcredit at the official website: www.yearofmicrocredit.org/
Many of the different organizations involved in microfinance are listed here:
www.yearofmicrocredit.org/pages/whosinvolved/whosinvolved_mfpartners.asp
Learn more about the UN year of microcredit and microcredit in general:
www.gdrc.org/icm/iym2005/un-resolution.html
www.cgap.org/about/microfinance.html
www.grameen-info.org/mcredit/unreport.html
Find out what the Canadian government is doing overseas:
www.acdi-cida.gc.ca/index-e.htm
Take the poverty quiz:
www.accion.org/involve_take_a_quiz.asp (“Did you know according to the latest available statistics, 1.2 billion people – or 20 percent of the world’s population – live on less than $1 a day. In sub-Saharan Africa there are 302 million people living on less than a dollar a day. The figure in Latin America is 60.7 million.”)

John William cares about the planet and how we live on it. Next month, he is planning to review the film The End of Suburbia. johnwil@oberon.ark.com