|“If we are to achieve the Microcredit Summit's goal of reaching
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, then the resources dedicated to microcredit
globally will need to be increased. It is, however, equally, if not
more important to ensure that the funding that is directed to microcredit
is spent in ways that will provide the most direct benefits to institutions
that are committed to achieving the Summit's goal.
We must have transparent information about how much of the money
goes to the poorest in the first cycle. In otherwords, we should know how
much money coming from the donor agencies is going straight to the poorest
as loans, and how much of each donor dollar spent on non-loan categories
actually leverages loans to the poorest in dollar terms in the subsequent
cycles, and how much goes to other activities.
My guess is that the amount of funds from donors going to ‘actual
loans to the poorest’ is quite low. I believe it is important, in
order to build public backing for donor initiatives to support MCPs and
the microcredit field in general, as well as to ensure that funds are benefiting
the poorest, that donors annually publish the amounts and percentages of
their funds going to loans to the poorest. Further, I would advocate that
each donor agency raises their amount to at least 70% of all funds being
used to promote microcredit/microfinance. The percentage can be shown
both as the percentage of overall Official Development Assistance (ODA)
going for loans to the poorest, and as the overall percentage of
funds for microcredit/microfinance. The CGAP Secretariat should take the
lead on this and reveal in more detail how it uses and reports on its core
fund, and also encourage CGAP member donors to do the same.”
— Muhammad Yunus
Summit launched a 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.
As the Microcredit Summit gathered for the second Meeting of Councils,
it is time to review what has been achieved and reflect on the work still
bo be done. To this end the Summit Secretariat has continued with its survey
of microfinance programs involved in this global campaign. This survey
reveals that while programs are reporting progress in reaching greater
numbers of clients and the poorest families, there is still much work to
be done. The survey reveals that among the most important, immediate challenges
facing the global campaign is the development of simple, cost-effective
measurements for determining the poverty level of microfinance clients.
At the Summit, nine central themes were extracted from the 55-page Declaration
and Plan of Action and enunciated at the Summit Council meetings. These
themes addressed a wide variety of issues. The essence of the Microcredit
Summit, however, can be summarized in the following four core themes.
1. Reaching the Poorest : The Summit recognizes that the
field of microfinance includes all those institutions providing financial
and other services to constituencies that are overlooked by the traditional
banking sector. The goal of the Summit, however, focuses on outreach to
the poorest families, defined in the Declaration and Plan of Action as
families in developing countries among the bottom 50 percent of those living
below the poverty line. Within industrialized countries the Summit
focused on all of those living below the official poverty line.
2. Reaching Women : Of the 1.5 billion people living on
under US$ 1 per day, 1 billion of them are women. Experience shows that
women are good credit risk, and that woman-run businesses tend to benefit
family members more directly than those run by men. At the same time, through
earning an income women achieve a higher status in their homes.
3. Building Financially Self Sufficient Institutions : Experience
has shown that microfinance programs in developing countries can structure
their interest rates and fees to eventually cover their operating and financial
costs. The Declaration and Plan of Action emphasizes the importance of
reaching financial self-sufficiency.
4. Ensuring Impact on the Lives of Clients and their Families:
While financial measures such as program repayment rates give an indication
of the strength of a microcredit institution, the Microcredit Summit is
commited to programs having a measurable, positive economic and social
impact on the lives of the poor families.
Result Achieved So Far
This repport is based upon results from a survey undertaken by the
Microcredit Summit Secretariat. As of May 31, 1999, more than 1500 microcredit
practitioner institutions worldwide had joined the Microcredit Summit Council
of Practitioners. In doing so, they embraced the Summit’s goal and agreed
to formulate a plan of action within one year of joining the council outlining
how their institution would contribute to its achievement.
As this survey is dependent on self-reported data, the Summit can make
no assurance as to the accuracy of the findings. Throughout this report,
the Summit includes information on how the Summit is seeking to address
issues and concerns raised by these findings.
As of May 31,this year 929 established microcredit practitioners
had responded to survey questionnaires. These programs together report
reaching 22,341,064 current clients. Most programs also reported the percentage
of their clients who were in the bottom 50 percent of the population living
below their country’s poverty line when they started with the program.
According to the information these programs reported, togather they are
currently serving 12,659,030 of the poorest families in all the countries.
It should be stressed that these numbers do not represent the total
number of clients served by the microcredit programs joining the global
campaign.More than 600 practitioner institutions in the campaign have not
yet reported on their programs. The Summit is unable to determine how many
clients are praticipating in more than one program. However, in most cases
of practitioner network institutions, the Summit used data from individual
programs rather than totals from the networks in order to avoid double-counting.
In addition, several practitioners do not give a verifiable identification
of how many of their borrowers are among the poorest.
|The absence of data on how many clients are among
the poorest need not be an indication that the program does not intend
to serve this clientele. Rather the absence of data points to one of the
central challenges facing this global campaign in its first years-the lack
of simple, cost-effective, reliable measurment tools to identify the poorest
families beyond general indicators such as the poverty level of a country
or the size of loans.
To fill this gap, the Microcredit Summit has in the meantime established
the Poverty Measurement Discussion Group to help identify simple, reliable,
cost-effective poverty measurements applicable in different regions of
the world. By collecting and disseminating this information, the
Summit Campaign intends to support microfinance practitioners world-wide
in reaching a consensus and adopting the most effective techniques to assist
them in identifying and reaching the poorest families. The Microcredit
Summit Campaign Executive Committee recently approved the cration of a
Microcredit Summit Poverty Measurement Tool Kit (PMTK). The first two measurements
to be included in the Summit’s PMTK are the CASHPOR House Index for use
in rural Asia, and the Small Enterprise Foundation’s Paricipatory Wealth
Ranking used in South Africa.These tools, and others to be indentified
for the tool kit, will be used to assess progress toward the Summit’s goal
of reaching 100 million of the world’s poorest families. The first, second,
and third papers of the Poverty Measurement Discussion Group can be found
at the website http://www.microcreditsummit.org/discussion.htm
or may be requested from the Microcredit Summit Secretariat office. The
Summit also commissioned a paper for the 1999 meeting of Councils that
deals with this issue, entitled “Overcoming the Obstacles of Identifying
the Poorest Families.” This paper is available at the website http://www.microcreditsummit.org/papers.htm
By 2005, the 929 established programs plan to be serving over 39 million
families who were very poor when they started with the program. This number
does not include many hundreds – if not thousands – of practitioner institutions
that have not yet joined the campaign. Experience tells us that while some
of these programs may fail or fall short of their projected targets, some
programs will exceed their targets, and that new programs will spring up
in the years to come.
Analysis By Region
The Summit Declaration anticipated that the majority of borowers would
be in the developing world, however microcredit has proven to be effective
in industrialized countries as well, despite a radically different economic
context. In industrialized countries the poor are those families who were
living below the nation’s poverty line when they received their first loan
and and or training and technical assistance. The field is still dominated
by large porgrams in Asia, with five of the ten largest programs in Bangladesh.
The ten largest programs together account for 15,063,402 of the 22,341,064
The Summit expects the early years of the Campaign to be characterized
by the modest growth of many small programs and the establishment of new
porgrams. While growth in the number of borrowers is welcome, the Summit
is more concerned to help these new and expanding programs focus on reaching
the poorest, especially women, develop self-sufficient institutions; and
adhere to the principles of best practices.
The campaign survey shows definite positive results in the number of
clients being served by microcredit programs. Determining whether this
growth in the number of programs and borrowers represents an increase in
the number of the poorest families being served is among the most important,
challenges facing the global campaign. The development of simple, cost-effective
measurements for determining the poverty-level of microfinance clients
will therefore continue to be addressed by the Microcredit Summit through
the Poverty Measurement Discussion Group and the Poverty Measurement Tool
One of the functions of the Microcredit Summit Campaign is to help existing
practitioners share experience and knowledge with each other, and with
the new and fledgling programs around the world. Through the Summit’s newsletter
Countdown 2005, the annual Meeting of Councils, the websites, and active
contact with practitioners worldwide, the Summit Campaign disseminates
information on best practices.
It is important to recognize that the cornerstone of microcredit is
the irrepressible desire and innate capacity of people to improve their
situation and to succeed, for themselves and especially for their children.
Access to credit for self-employment and other financial and business services
gives the poorest families the opportunity to achieve their own triumph
over the cruelties of extreme poverty. The Microcredit Summit chose to
focus on the poorest people, especially women, because experience has shown
that they are most likely to be left out of poverty eradication
In the words of Melchora Jihuallanca, a borrower from FONDECAP in Huallatayre,
Peru, “I don’t know how to read or write, but I have a head with to think.
Before the credit, I was just in my house, taking care of my children and
my animals. I did not know anything about business and I only looked at
my husband’s face. My children did not go to school because there was not
enough money. Now that I have started to take credit with FONDECAP, I have
learned how to run my own business. My husband respects me and now I talk
with him. I count on my money to send my children to school.”
|Further information on the Microcredit Summit is
available by writing to :
The Microcredit Summit
440 First Street, N.W.
Washington, DC 20001
tel : + 1 202 637 9600
fax : + 1 202 637 3566
or by visiting our website http://www.microcreditsummit.org
Data compiled by Microcredit Summit research staff:
Lisa Jane Kuhn