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