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Page 12 of 15
Donors As Source of Fund
During the eighties, donors showed strong support to microcredit. It was hoped that donors will continue to support microcredit programmes in an enthusiastic way because it addresses all the issues that have high priority in their agenda. Poverty reduction, women empowerment, nutrition, health, family planning, education, housing, self-reliance, sustainability, all are addressed by microfinance. But in reality the donors gradually became rather skeptical about something or other about microfinance. Sometimes it is sustainability issue, sometimes it is not-reaching-poorest issue, sometimes commercialization issue, sometimes impact issue. Some how, they now give the impression of being cautious observers of microcredit, rather than its enthusiastic promoters. One explanation for this may be that the donor officials have been receiving confusing advice. They create confusion by formulating their questions in a wrong way. Their discussion goes on endlessly about whether microcredit can reach the poor, whether it reduces poverty, whether it is sustainable, etc. Instead, the right way to proceed would have been to identify the microcredit programmes who do all these and encourage the donors to support them. They want all types of microcredit programmes to show the same result. Donor advisors come from different types of expertise. Most of them do not come with any microcredit expertise. So they assemble everything under the sun which come in the shape of small loans, and call all of these as microfinance. From this big pot, full of "microfinance" stew, they pick up all kinds of examples to come up with all kinds of conclusions.
If we can clarify what we exactly mean by the word microcredit when we use it in our dialogue with donor officials, we may help them to take appropriate decisions for each category of microcredit. They may not feel as hesitant as they are now. I am focusing on the word microcredit, instead of "microfinance" because all the problems are concentrated in the credit component of microfinance. Once we get a clear picture of microcredit, we won't have any problem justify with "microfinance". Inter-disciplinary (health, education, technology, human-capital, etc.) competition with microcredit within the donor agencies, may take a turn to inter-agency collaboration with microcredit if right type of microcredit programme/s can be isolated.
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