Increased Micro-Lending Can Help WB Reduce Poverty
Liquid Africa, - The World Bank could do better in reducing poverty if it increased, to more than 1 percent, its budgetary allocation to micro-credit for the world's poorest.
This follows revelations the Bretton Wood institution sets aside less than 1 percent of its spending for micro lending to the poor clients who can not meet requirements for bigger borrowing or credit from financial institutions to sustain self income generating ventures.
World Bank President Mr James Wolfensohn reportedly admitted that micro-finance has a great potential to change the economic and social face of the lives of the world's poorest.
"I very much agree with your observation, that micro finance has demonstrated powerful impact in improving the livelihood of the poor and a crucial role in reducing poverty.
"Access to financial services for the poor is condition for the attainment of the Millennium Development Goals," said Mr Wolfensohn.
Under the Millennium Development Goals, 700 parliamentarians from across the world set out to get additional funding for micro credit to the poorest, to reduce in half by 2015, the number of people living on less than US$1 per day.
With respect to that, the United Nations has declared year 2005 as the International Year of Micro Credit, during which time all stakeholders are expected to launch a vigorous attempt to stimulate economic development and reduce poverty among the world's poorest through availing micro finance to the world's poorest.
According to a United States of America (USA) non-governmental organisation's report, RESULTS Educational Fund, more than 54 million of the world's poorest, 81 percent of them women, received micro credit loans last year to start or expand business.
The organisation has since set on a drive to reach the 100 million of the world's poorest with micro credit by the end of 2005.
Mr Darley Harris, the director of the Microcredit Summit Campaign held in the US said "The words of support from Mr Wolfensohn are appreciated, but the truth of the matter is that currently less than 1 percent of annual World Bank spending goes to microcredit, the World Bank can do better than that," said Darley Harris.
The report presented at the Microcredit Campaign Summit by the US NGO, with research data compiled after a study of more than 300 thousand institutions from across the world and 80 million clients, established that 54 million of them survived on less than US$1 per day, but indicated that micro credit could deliver them from poverty.
Mr Harris said micro credit would succeed in economically empowering the poor since the system was not as rigid and demanding as in commercial finance lending.
"This is not some form of junior banking, it is a revolution in banking.
"It had to break countless rules to succeed.
"When banks lent to the rich, these micro banking pioneers lent to the poor, when banks made large loans, they made small ones. When banks required collateral they loans were collateral free, when banks lent to the rich they lent to the poor, when banks lent to men they lent to women. When banks required endless paperwork, their loans were illiterate friendly, when clients went to the banks, they went to the clients," said Mr Harris.
Micro loans are used for a wide range of business activities including low-tech endeavours like hushing rice, riding bicycle rickshaws, sewing, carpentry, market gardening, poultry and high tech enterprises like selling cellular phone time in rural areas were there are no other phone services.
Micro credit has been successful in Zimbabwe, including in rural parts of the country just like the case with India, where micro finance has been successfully used to economically empower the poor.
World Vision Zimbabwe (WVZ), a Christian oriented NGO has been leading the pack of micro-financiers with its micro-finance arm, Pundutso (Pvt) Ltd, formed solely to provide affordable finance to economically active but poor clients.
The initiative has been a success, a culmination that threatens to change the economic face of the predominantly rural areas of Murewa.
About eight months ago, nine projects were running at full throttle and the entrepreneurs were living on the income of their projects they started after they accessed cheap small loans from the World Vision Zimbabwe.
WVZ had supports a handful of such projects across the country and had since formed an international micro credit arm Vision Fund International, whose goal is to borrow money at attractive interest rates for making micro finance loans to the poor.
WVZ runs such programmes in 45 developing countries and stresses that the lack of credit to the poor is the biggest impediment to humanitarian development and poverty alleviation.
Copyright 2004 Comtex News Network, Inc.
All Rights Reserved, 29 December 2004
The Herald, Redistributed by LiquidAfrica.com, All Rights Reserved
