Microfinance MDGs

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Information about Microfinance MDGs
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Published on November 28, 2007

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Microfinance and the Millennium Development Goals:  Microfinance and the Millennium Development Goals PRESENTATION INSTRUCTIONS:  PRESENTATION INSTRUCTIONS September 5, 2003 Overview:  Overview What is Microfinance? What is the relationship between poverty & financial services? How does microfinance contribute to the MDGs? Can microfinance reach the poor sustainably on a massive scale? How can donors use microfinance to achieve the MDGs? What is Microfinance?:  What is Microfinance? NOT just microcredit – the poor require a broad variety of financial services NOT a magic bullet in the war against poverty NOT a short-term or one-time exercise to solve a multi-dimensional problem NOT a substitute for investment in education, health, or infrastructure a wide range of flexible, appropriate services tailored to the preferences & needs of the poor one of many interventions to alleviate poverty successfully provided by a variety of institutions able to contribute to ongoing social returns only when providers are sustainable Financial services for the poor are… Poverty is Multi-dimensional:  Poverty is Multi-dimensional Material deprivation (low food consumption, poor housing) Low human development (education, health) Lack of voice & ability to influence decisions Acute vulnerability to adverse shocks (illness, economic crises, natural disasters) P O V E R T Y What is the Relationship between Poverty and Financial Services?:  What is the Relationship between Poverty and Financial Services? Access to financial services Increase & diversify incomes Build assets Mitigate risk Plan for the future Make choices Increase food consumption Invest in education & health Invest in housing, water, sanitation The Millennium Development Goals:  The Millennium Development Goals Eradicate extreme poverty and hunger Achieve universal primary education Promote gender equality and empower women Reduce child mortality Improve maternal health Combat HIV/AIDS, malaria, and other diseases Ensure environmental sustainability Develop a global partnership for development Eradication of Extreme Poverty and Hunger:  Eradication of Extreme Poverty and Hunger In India, half of SHARE clients have graduated out of poverty. In El Salvador, the weekly income of FINCA clients increased on average by 145%. In Vietnam, clients of a Save the Children partner organization reduced food deficits from three months to one month. Improving Education:  Improving Education In Bangladesh, basic education competency among 11-14 year-old children in BRAC client households doubled in 3 years, overtaking children in non-client households. In Uganda, Foccas clients spent a third more than non-clients on their children’s education. In Bangladesh, nearly all girls in Grameen Bank client households received schooling, compared to 60% of girls in non-client households. Empowering Women:  Empowering Women In Indonesia, female clients of BRI were more likely than non-clients to participate in decisions about allocating household money, children’s education, and family size In India, SEWA clients have lobbied for higher wages and the rights of women in the informal sector. Improving Health:  Improving Health In Bangladesh, fewer BRAC clients suffered from severe malnutrition than non-clients. In Bolivia, children of CRECER clients had higher rates of DPT3 immunization than children of non-clients. In Uganda, 32% of Foccas clients had tried an AIDS prevention practice, twice the percentage for non-clients. Housing, Water, and Sanitation:  Housing, Water, and Sanitation Many microfinance programs provide loans tailored for tube-wells and toilets, reducing incidence of fever, influenza and typhoid. In India, SEWA provides loans to pay for tap water, toilets, drainage, and paved roads. Grameen Bank provides 80,000 housing loans/year and reports improved security during natural disasters due to sturdy housing. Can microfinance reach the poor sustainably on a massive scale? :  “Excellent financial performance does not imply excellence in outreach to the poor … …Reaching the poor is not at odds with maintaining excellent financial performance” Can microfinance reach the poor sustainably on a massive scale? BUT Scale/Outreach/Sustainability:  Scale/Outreach/Sustainability Source: MicroBanking Bulletin, no. 9 (July 2003). Reaching the Poor Sustainably:  Reaching the Poor Sustainably How can donors use microfinance to help achieve the MDGs?:  How can donors use microfinance to help achieve the MDGs? Communicate to staff that access to financial services contributes to the attainment of the MDGs Encourage a range of institutions & methodologies to provide financial services to the poor Promote strategies that seek to provide ongoing financial services to the poor on a large-scale basis Support government policies that promote outreach to poorer clients Recognize that, in many cases, microfinance may not be the best tool for poverty alleviation Communication Reality Diversity Scale & Permanence Outreach Should All Development Programs have a Financial Services Component?:  Should All Development Programs have a Financial Services Component? Summary:  Summary Financial services enable the poor to increase and diversify incomes and build assets, which in turn enables them to reduce and mitigate risks, make choices, and plan for the future. With strong management and efficient operations, the massive scale required to reach the billion people targeted by the MDGs is possible. Providing sound financial services for the poor is a specialized activity requiring expertise and a long-term commitment. Financial services for the poor is not a NOT a substitute for investment in education, health, or infrastructure. Where to get more Information:  Where to get more Information Elizabeth Littlefield, Jonathan Morduch, and Syed Hashemi Mesbahuddin, "Is Microfinance an Effective Strategy to Reach the Millennium Development Goals?" CGAP Focus Note No. 24 (January 2003). Jonathan Morduch and Barbara Haley, "Analysis of the Effects of Microfinance on Poverty Reduction" (Ottawa: Results Canada, 2001). Anton Simanowitz, with Alice Walter, "Reaching the Poorest while Building Financially Self-Sufficient Institutions, and Showing Improvements in the Lives of the Poorest Women and their Families," in Pathways Out of Poverty, ed. Sam Daley Harris (Connecticut: Kumarian Press, 2002). Contact: Nataša Goronja 1818 H Street, NW Washington, DC 20433 Tel: 202-473-9594 Fax: 202-522-3744 E-mail: cgap@worldbank.org Web: www.cgap.org

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