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Microloans Offer Hope Affecting Hundreds of Millions
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More than 66 million of the world’s poorest people, 84 percent of them women, received tiny loans last year to start or expand micro businesses, according to a report released today by the Microcredit Summit Campaign.

The Campaign, a project of the US-based non-governmental organization RESULTS Educational Fund, seeks to reach 100 million of the world’s poorest families with microcredit by the end of 2005. End of 2005 data will be released at the Global Microcredit Summit to be held November 2006 in Halifax, Canada.


Data for the State of the Microcredit Summit Campaign Report 2005 was gathered from more than 3,100 institutions worldwide and its release comes at the end of the United Nations’ International Year of Microcredit. In total, the institutions reported reaching more than 92 million clients, with 66.6 million individuals falling into the Campaign’s focus on the very poor, those living below US$1 a day. These 66.6 million poorest families affected 333 million family members, which is equal to the combined populations of Britain, France, Germany, Italy, Spain, The Netherlands, Switzerland, and Norway. “This field was previously considered too micro to matter much,” said Campaign Director Sam Daley-Harris. “But now it’s affecting a population ten times greater than that of Canada. Its reach is no longer micro.”


Microloans are used for a wide range of business activities including low-tech endeavors such as husking rice, riding bicycle rickshaw taxis, sewing, and petty trading as well as high tech enterprises like selling cellular phone time in rural areas where there are neither electrical wires nor land-line phone services.


The report highlights two studies released this year that underscore the importance of microcredit in achieving the Millennium Development Goals. Both focus on Bangladesh, the world’s most saturated microfinance market. For 14 years, World Bank researcher Shahidur Khandker studied three Bangladeshi microfinance institutions (MFIs): BRAC, Grameen Bank, and RD-12, the latter a government program. Khandker found that three percent of clients left poverty each year because of their microloans, that one percent of non-clients left poverty due to the spillover effect of increased economic activity at the village level, and that microfinance accounted for 40 percent of the entire reduction of moderate poverty in rural Bangladesh.


Another study, the UN Development Program’s Human Development Report 2005, compares India and Bangladesh in a discussion of how low income need not be a barrier to progress on the Millennium Development Goals. According to the report, even with India’s stunning economic growth, Bangladesh has overtaken India in reducing its child mortality rate. As a result, “had India matched Bangladesh’s rate of child mortality reduction over the past decade, 732,000 fewer children would die this year in India.” 


The Human Development Report credits Bangladesh’s progress to several factors that point to the impact of microcredit including: active partnerships with civil society and virtuous cycles and female agency. This last area is described as follows:


Improved access to health and education for women, allied with expanded opportunities for employment and access to microcredit, has expanded choice and empowered women. While disparities still exist, women have become increasingly powerful catalysts for development, demanding greater control over fertility and birth spacing, education for their daughters, and access to services.


“We’ve been waiting for the effect of millions of microloans in Bangladesh to finally show up in that country’s macro data, and now we have it,” said Daley-Harris. “With what we’re seeing in these studies and with the Millennium Development Goals due in just 10 years, it would be unconscionable for major donor agencies like the World Bank to continue spending less than one percent a year on microfinance.”


The Microcredit Summit report underscores an effort by hundreds of parliamentarians to get additional funding for microcredit to those living on less than US$1 a day. The initiative was inspired by the Millennium Development Goal focused on cutting the number of people living below US$1 a day in half by 2015. The Millennium Development Goals were agreed to by more than 180 world leaders at the United Nations Millennium Summit in 2000.


The report highlights stories of microcredit clients like Susan Wangui, who grew up in a poor, rural area of Kenya. She was forced to drop out of school after the fourth grade when her family could no longer afford the school fees and was thrown out of her house when she became pregnant at 17. Susan and her infant son moved to Nairobi, where she married and had a daughter. Her husband left her when they learned she was HIV-positive. Unable to find work and with no means to support her two small children, Susan ended up in prostitution.


Susan learned about Jamii Bora, a Nairobi-based microfinance institution, from neighbors in her slum. She completed their business training, which gave her the skills and confidence to begin her clothes mending and sales business. The microfinance services enabled her to quit prostitution and move her family from a shack in their crime- and disease-ridden slum into a safer house.


Susan sometimes struggles to pay the higher rent and occasionally must skip meals, but feels her children’s safety justifies the difficulties. Their house has a floor, running water, a waterproof roof and locking door -- all luxuries they did not have previously. With each increasing loan, Susan buys more raw materials in bulk at lower costs, thus increasing her business’s profitability. She is convinced she would not be alive without Jamii Bora’s medical insurance and access to HIV medication, and can’t imagine what would become of her children, as there is no one else to care for them. Susan has savings for the first time and is striving to earn enough to ensure her children’s educations so they can break free from the chains of poverty.


“We are committed to multiplying stories like this one 100 million times,” said Daley-Harris. “When we arrive at the Global Microcredit Summit in November 2006, in Halifax, Canada, I am sure we will have reached more than 100 million families overall, and we will attain the 100 million poorest benchmark one or two years later.”


The Halifax Summit will also serve to relaunch the Campaign with two new goals: 1) reaching 175 million of the world’s poorest families by the end of 2015 and 2) having 100 million poorest families move above the US$1 a day threshold by the end of 2015. 


( December 7, 2005)

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