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2002/11 MC Summit + 5 (Press)
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SPEAKING POINTS
EASY LEARNING EXERCISE - NOVEMBER 2002
A key message coming from the Microcredit Summit+5 meeting taking place in New York 10-13 November 2002 will be that:
Misconceptions about microcredit and the poor have hindered the growth of microcredit globally.
One shocking misconception is that microcredit institutions cannot reach the very poor. The Summit organisers will challenge that.
They will also challenge World Leaders to re-evaluate their poverty reduction strategies that have excluded microcredit as a top tool.
Microcredit provides small loans for very poor people to start, or expand, a self-employment venture. It can enable a poor person to transform their own and their families lives - providing better nutrition, education, housing and health.
Violet Mutoto, a Ugandan borrower with the Freedom From Hunger programme used her first loan of $43 to rent a store/house and buy supplies. Her second loan enabled her to expand her stock. Now she sells cooking oil, flour, salt, sugar, malaria pills and condoms. She uses her $5-$10 daily profit to buy food and school supplies for her children, she sends her older children to secondary school and she has saved over $100 for emergencies.
The Summit will show that microcredit and the self-employment that it ignites, is a pivotal intervention in cutting poverty in half by 2015.
BACKGROUND SHEET 2 - NOVEMBER 2002
WHO WILL BE AT THE SUMMIT?
So far the following heads of state and government and dignitaries have confirmed their attendance:
* Vicente Fox - President of Mexico
* Dr Alhaji Yaha AJJ Jammeh - President of the Gambia
* Ms Truong My Hoa - Vice President of Vietnam
* Paul O'Neill - US Secretary of the Treasury
* Hillary Rodham Clinton - US Senator, NY
* Sra Martha Sahagun de Fox - First Lady of Mexico
* Mrs Begum Sehba Musharraf - First Lady of Pakistan
* Laraba Tandja - First Lady of Niger
* Lennart Bage - President of the International Fund for Agricultural Development (IFAD)
* Noleen Heyzer - Executive Director of the UN Development Fund for Women (UNIFEM)
* Normand Lauzon - Executive Director of the UN Capital Development Fund
* Kul C Gautam - Deputy Executive Director of UNICEF
* Ted Turner - Chairman, United Nations Foundation
* Thousands of microcredit practitioners and proponents
What's happening in the UK?
Although no UK MPs will attend the MCS+5 meeting in New York they are showing leadership in the area of microcredit.
All Party Parliamentary Group on Microfinance – Update
Those who participated in our campaign to get an All Party Group on Microfinance set up at Westminster will no doubt be interested to hear how the newly formed group is getting on.
The group was launched at a meeting on 2nd July attended by nine MPs:
Richard Allen (Sheffield)
John Barrett (Edinburgh West)
Annette Brooke (Mid Dorset & North Poole)
Tony Colman (Putney)
Paul Goggins (Wythenshawe & Sale)
Norman Lamb (North Norfolk)
James Plaskitt (Warwick & Leamington)
Robert Syms (Poole)
Gareth Thomas (Harrow West)
Officers of the group are:
Chair (Annette Brooke), Vice-Chair (Paul Goggins), Treasurer (Robert Syms), Secretary (John Barrett), Patron (Kriss Akabusi).
Other MPs have joined the group since its first meeting.
At the inaugural meeting, presentations were given by David Coates from Opportunity International, Sheila Davie from RESULTS and Kriss Akabusi (the Olympic athlete/TV presenter) from REACH.
The All Party Group is going to look at ways of placing microfinance higher on the government’s agenda in order that the goal of the Microcredit Summit is reached. For example it will generate Parliamentary Questions and Adjournment Debates and will invite DFID representatives to speak at meetings. It also hopes to arrange visits to existing microfinance projects in developing countries and to help to promote the work of NGOs involved in microfinance.
These are early days, and during the long summer recess administrative tasks such as the official registration of the group have been completed.
A couple of actions have already been taken however: on 23rd July the Chair of the group, Annette Brooke, raised a Parliamentary Question:
Mrs. Brooke: To ask the Secretary of State for International Development which Ministers will represent the Government at the Microcredit summit plus five meeting in New York in November; and if she will make a statement. [71389]
Clare Short: I plan to attend the annual CGAP meeting in September in Morocco to join discussions on how to improve donor effectiveness in micro-finance, but I do not plan to attend the Microcredit summit as well.
DFID will be represented at the summit at official level. We have invited funding applications to enable would-be participants from developing countries to attend the event.
In October she followed this up with a letter to Clare Short asking her to send a high-level political representative to the November Summit. She suggested Minister for International Development Sally Keeble MP.
The next meeting of APPGOM is planned for the end of November. We have suggested that Anton Simanowitz be asked to present his work on how microcredit can reach and impact the lives of the poorest people - a key paper that he presented at the MCS+5 meeting.
As soon as the date is confirmed we’ll let you know so that you can encourage your MP to attend.
BACKGROUND
BACKGROUND SHEET 1 - NOVEMBER 2002
Microcredit
In our world:
* - over 1 billion people live on less than $1 a day
* - poverty keeps more than 100 million children from attending school
* - poverty is responsible for the deaths of nearly 30,000 children every day from mostly preventable diseases and malnutrition.
People who live in extreme poverty often live in conditions of poor health and nutrition, with little or no education and no access to gainful employment. The stress of poverty breeds hopelessness and social instability.
Microcredit is the practice of providing very poor people, especially women, with access to credit. It can allow them to transform their own and their families’ lives, providing better nutrition, education, housing and health for themselves and their children. In impoverished parts of the world, a tiny loan of £50-£100 or less, provided at competitive interest rates for starting or expanding a self-employment venture, can allow people to support themselves, breaking the cycle of poverty.
A microcredit borrower might buy the materials to open a small store selling basic cooking and household supplies, or she might buy a pot and bulk ingredients for selling simple baked goods or snack foods on the street. Some borrowers take out further loans to expand their businesses - buying a second cow to sell even more milk in their village, or building a simple hut with a tin roof to house their store.
“Had I had access to the Kashf loan much earlier, life would have been so much better.” Khursheed Baji, 60-year old mother of 6, is a borrower with the Kashf programme in Bangladesh. She lives in a village situated about 30 miles outside of Lahore. Khursheed used her microloans to set up a business selling traditional bracelets. She used additional loans to set up a shoe business and then to expand both enterprises. She has needed the income badly because her husband suffers from acute heart problems and has been bedridden indefinitely. In the absence of her husband’s income, microcredit enabled Khursheed to earn about $25-30 each month, enough to sustain her family. Now her children are grown, but she and her husband can still support themselves in an economy without social nets for the elderly poor.
Successful microcredit programmes not only improve the financial health of the individual, but also improve the economic health of a community from the bottom up. They also improve the overall living conditions of a community. Women, who receive the majority of these loans, reinvest their profits in their families.
Studies show that microcredit works. In a 1998 study, the World Bank found that extreme poverty fell 70% within 5 years among borrowers of the Grameen Bank’s microcredit programme in Bangladesh. Access to tools and credit needed to succeed allows the poor to reap the benefits of their own skills and hard work. Most poor people do not have access to banks or other formal financial services and are forced to borrow from money-lenders, or “middlemen,” who charge exorbitant interest rates.
Since its inception in Bangladesh in the early 1980s, microcredit has become one of the most respected and popular development programmes. The need for microcredit, and the ability of very poor people to use it effectively, seems to know no bounds.
What Makes Microcredit a Smart Investment?
* - Microcredit is an economically sustainable method of fighting poverty. In developing countries, the rate of repayment of well-established microenterprise programmes ranges from 95-99%. Repayment rates are high because, through a system of peer support and pressure used in many microcredit models, borrowers are responsible for each other’s success and ensure that every member of their group is able to pay back her loans.
* - Microcredit is cost-effective: monies are loaned and paid back to programmes and can then be used again by programmes for new loans, providing other poor individuals with credit. For example, one estimate of the Foundation for International Community Assistance (FINCA) programmes indicates that $1 million of loan capital invested in a FINCA village bank will generate $15 million in small loans and $3 million in savings in 5 years.
* - With support to grow and become efficient, microenterprise programmes in developing countries need less grant money, can utilise loans and loan guarantees, and eventually get linked into the formal financial system. Well-run microenterprise organisations in developing countries are eventually able to sustain their operations through interest income; organisations have been able to cover 100% of operational costs with the interest income generated by the loans.
* - It has been proven possible for a microenterprise programme to both target the very poorest people with loans and become financially self-sufficient. While leading microfinance institutions catering to the poorest clients show lower levels of sustainability, they are actually improving their financial performance more rapidly than those that are serving less poor clients.
* - Many microenterprise institutions are now operating independently of foreign aid, though their existence would have been impossible without previous grants for start-up and expansion. The Grameen Bank of Bangladesh has revolved its loan capital over 5 times, and neither Grameen nor BancoSol in Bolivia need donor money any longer for the operation of their banks. In 1995, Grameen actually turned a profit. As of May 1995, interest income for FINCA programmes in the Dominican Republic covered 81% of the programme's operating costs; in Honduras 96%; and in Nicaragua 126%.
Microcredit is popular among donor agencies and those undertaking development work both because of its impressive success rate, and because it is financially sustainable (since loans are repaid with interest). Microcredit programmes have branched out to reach new borrowers, rural and urban, on nearly every continent including into the USA. Along with expansion has come innovation, such as providing basic health education along with credit.
Although micro-loans can be useful to people who are less poor, it is critical that, as the industry expands, it remains focused on helping the very poor break the cycle of poverty.
Reaching the Microcredit Summit’s goal (assuming an average of five people per family) would mean reaching 500 million very poor people with microcredit - nearly half of those living on less than $1 per day. As of early 2002, there were about 30 million microcredit borrowers around the world, and 19 million of them were among the world’s poorest people when they took out their first loan.
Microcredit is an important tool in our campaign to end hunger and the worst aspects of poverty and in ensuring the Millennium Development goals are reached.
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Note: US$1is approximately 70p.
ACTION SHEET
TAKE ACTION - NOVEMBER 2002
MCS+5 - The Challenge to World Leaders
"If we are to succeed in cutting absolute poverty in half by 2015, microcredit, and the dramatic expansion of self-employment that it ignites, has to be a pivotal intervention."
Sam Daley-Harris, Director of the Microcredit Summit Campaign
ACTION: Write a letter to local, regional or national media.
1. Declare your annoyance (or even outrage) that there has been no (or little) coverage of the Microcredit Summit+5 meeting.
2. Say that this is especially annoying as this Summit meeting - unlike many others (that have had significant media coverage) - is well on the way to achieving its goal .
3. Say that the goal is only put in jeopardy because most UN and other donor agencies have missed the mark by omitting microcredit from their list of key tools for cutting poverty in half by 2015, the key Millennium Development goal.
4. Tell about the success of microcredit, even for the poorest people.
5. Challenge world leaders to re-evaluate their poverty reduction strategies in light of the effectiveness of microcredit.
BACKGROUND
In February 1997, RESULTS Educational Fund convened the Microcredit Summit, launching the nine-year Campaign to reach 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 the year 2005. This historic event, held in Washington DC, USA brought together over 2900 delegates from 137 countries.
Building on the success of the 1997 Summit, the Campaign has organised a yearly Meeting of Councils, two Global meetings (1998 in New York City, USA and 1999 in Abidjan, Côte d'Ivoire) and three Regional meetings (2000 in Harare, Zimbabwe for Africa, 2001 in New Delhi, India for Asia and the Pacific and 2001 in Puebla, Mexico, for Latin America and the Caribbean).
The MCS+5
For the first time since 1997, the Microcredit Summit Campaign will organise a summit-level meeting. The Microcredit Summit+5 will be held 10-13 November 2002 at the Hilton New York in New York City. More than 3,000 delegates from more than 140 countries are expected, including heads of state and government and other dignitaries.
HAVE WE MISSED THE MARK?
When thousands of delegates gather for a five-year review of the 1997 Microcredit Summit, organisers plan to show that most UN and other donor agencies have missed the mark by omitting microcredit from their list of key tools for cutting absolute poverty in half by 2015, one of the Millennium Development Goals.
The 1997 Microcredit Summit was organised by civil society in response to the UN summits of the 1990s not emerging with a compelling, measurable goal for expanding microcredit for the poor.
"Now when you look at the donor agencies' policy papers and plans for cutting absolute poverty in half by 2015," says Sam Daley-Harris, Director of the Microcredit Summit Campaign, "at best microcredit is left as a footnote.
"The world is not skilled at generating wage employment for people making 50 cents a day," Daley-Harris continues. "If we are to succeed in cutting absolute poverty in half by 2015, microcredit, and the dramatic expansion of self-employment that it ignites, has to be a pivotal intervention."
MISCONCEPTIONS & CONVENTIONAL WISDOM?
Organisers contend that at the time of the 1997 Summit, a series of misconceptions were strongly espoused by many in the microfinance industry and informed the heads of donor agencies incorrectly. This conventional wisdom held that a microfinance institution cannot reach very poor families, because they are too expensive to identify and motivate; if an institution could reach these families, they would be such a drag on its financial performance that it could not become financially self-sufficient; and even if an institution reached the very poor and became financially self-sufficient, it would just add a debt burden to very poor families.
"Taken together," Daley-Harris explains, "these views argued that microcredit is not for the very poor and not for poverty reduction. And so donor agencies have not include microcredit among their top tools for cutting absolute poverty."
THE CHALLENGE
The Microcredit Summit Campaign insists that the conventional wisdoms are wrong. Six papers have been commissioned for the Microcredit Summit+5, which according to organisers, serve as a road map for ensuring microcredit contributes powerfully to cutting absolute poverty in half by 2015.
Among them, "Ensuring Impact" highlights SHARE in India and CRECER in Bolivia. SHARE is a microfinance institution reaching 100,000 clients, all of them women. Externally administered assessments show that 72.5% of SHARE's entering clients live on less than a dollar a day, that the institution is 100% financially self-sufficient, and that one-third of mature clients (clients that have been with SHARE for 3 years) are no longer poor.
"This is not an isolated case," says Daley-Harris. "And donor agencies should not treat it as such. The issues raised at the Microcredit Summit+5 will be critical to a dramatic reduction in absolute poverty."
Before opening my food stand, I used to work as a maid in other people's houses. I had to work from dawn to late night almost for a pittance. We used to live in temporary housing made of straw. Those terrible days are now behind me. Now, I have replaced my old house with a tin shed and my two children are attending primary school.
Jamila, microcredit borrower, Bangladesh Rural Advancement Committee (World Bank, January 2000)
“I am very proud that I can afford something like this store, even though I am a woman.” Violet Mutoto, a Ugandan borrower with the Freedom From Hunger programme, lives in a poor village on the outskirts of a large town. Violet’s husband died and she now lives with her four children in an 8’x10’ room, adjacent to a smaller room that houses her store. The building is made of mud, with dirt floors and a corrugated tin roof. There is no plumbing and the family shares a latrine not far from the house. Violet is her family’s sole breadwinner. She used her first loan of $43 to rent the house/store and buy supplies. After repaying that, she used her second loan to expand her store’s stock. Now that she sells cooking oil, cassava flour, salt, cheese, biscuits, sugar, malaria pills, and condoms, she is having no trouble repaying her third loan. Her $5-$10 in daily profits buys food and school supplies for her children. She can now afford to send her older children to secondary school. She has saved almost $100, set aside in case of emergency. Freedom from Hunger aggressively targets the poorest women in rural and urban communities
The Microcredit Summit+5 will address the misconceptions about microfinance and the poor that have hindered the growth of microcredit globally. It will challenge world leaders to re-evaluate their poverty reduction strategies in light of the effectiveness of microcredit.
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This Action Sheet uses information from the MCS campaign and RESULTS USA.
RESULTS, 13 Dormer Place, Leamington Spa, CV32 5AA
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