UNITED NATIONS CAPITAL DEVELOPMENT FUND    Microfinance

Issue 18 / November 2005

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By Irena Budimova, Robert F. Wagner Graduate School of Public Service, New York University

Bangladesh celebrates the International Year of Microcredit



Bhutan observes the International Year of Microcredit



The International Year of Microcredit in the Central African Republic

From the beginning, the United Nations recognized that for the International Year of Microcredit to be a success, the vast panoply of bankers, regulators, clients, academics, governments and aid workers must be brought together to explore the question: Why are so many people excluded from the formal financial sector? In order to do this, the Year recognized that it needed National Committees to engage hundreds of ministries, governments, banks, NGOs, and most importantly, clients. The Year needed to ensure that no one group owned the intellectual property of microfinance, in order to be inclusive. It needed National Committees to provide national input, to elicit national-level debate, and to give those without a voice in their countries a platform for expression. Because finance works best on a global basis, from the bottom up, experiences from the national level needed to be shared, grown and leveraged at a global level. Ultimately, no one knows more about what impediments countries face than people in those countries.

In the end, the International Year of Microcredit engaged an unprecedented number of countries to join in this extraordinary effort to promote the importance and potential of microfinance around the world. As a result of the Year's efforts, a total of 101 countries committed themselves to building more inclusive financial sectors, while 61 countries have carried out formal national activities through the establishment of National Committees or Focal Points. The National Committees have had strong governmental support and count 215 government institutions as part of their membership.

Thirty-three Central Bank Governors, 93 banks and bank associations, 85 private sector organizations, 265 microfinance networks, 59 multilateral organizations, and 45 cooperation agencies are all active members of the National Committees. The unwavering support of these participants demonstrates the success of the Year in engaging both the public and private sectors in recognizing microfinance as an extremely important tool to alleviate poverty and meet the Millennium Development Goals.

The Year's success lies in building impressive momentum on the ground, and in committing the participating countries to continue the objectives of the Year beyond 2005. The National Committees have effectively mobilized governments in implementing long-term initiatives that will lead to real changes in the lives of poor people.

National Committees Across the World

Africa, with a total of 31 countries involved in activities related to the Year, leads the effort of promoting increased access to financial services across the world's regions. It has established a total of 19 National Committees with many countries incorporating microfinance as part of their long-term National Policy.

Asia has ten National Committees, with 17 countries supporting activities that will forward the objectives of the Year. Latin America has established 12 National Committees while 19 countries have joined in Year activities. In the Middle East and Eastern Europe, 15 countries committed to increasing access to financial services, with eight National Committees. More than half of all OECD countries are involved in Year activities, 12 through the formal arrangement of National Committees.

Achieving Goals

Building Commitment

Many countries made clear commitments to furthering the objectives of the Year beyond 2005. These include passing legislation that will allow microfinance to play a greater role in society, and organizing microfinance networks in order to engage different stakeholders. The Year has propelled 23 governments to develop National Microfinance Strategies, while 31 countries are developing or revising existing laws to enable an environment that is conducive to microfinance.

African countries have shown a clear dedication to microfinance. Benin has developed a National Policy for Microfinance and various microfinance laws are being developed. The National Committee of Ghana has sponsored visits to Uganda, Ethiopia and Bangladesh, to learn from those countries' best practice microfinance sectors in order to support Ghana's National Microfinance Policy. Botswana is creating an Action Plan for microfinance. Kenya is lobbying for the passing of a Microfinance Bill.

Beyond Africa, countries across the world have committed themselves to building inclusive financial sectors for the long-term. An important feature of the Asian National Committees is the participation of the private sector: private banks are involved in seven of its National Committees. Chile and Mexico have made great strides in building commitment beyond the Year. Chile is developing recommendations for improved microfinance in the country, while Mexico will launch approximately ten new microfinance institution branches. Bosnia and Herzegovina is assessing the need for new laws on microlending. Turkey has opened a Microfinance Information Centre, and will establish the Turkey Grameen microfinance project and a Microfinance Sector Development Project to facilitate the development of the microfinance industry.

Filling Information Gaps

In order to establish long-term commitment to microfinance, National Committees conducted research, evaluated current practices, and developed recommendations on national strategies for microfinance. The research and evaluation informs the public of the opportunities of microfinance while helping microfinance institutions develop and offer effective financial services.

Forty-six countries conducted research on access to financial services through country assessments of the availability and demand for microfinance, while 31 countries organized training for microfinance institutions and other stakeholders. Ten countries have established formal centers providing information and assistance to microfinance institutions and their clients.

The National Committee of Mongolia, for example, organized a National Summit on "Microcredit and Entrepreneurship" which was attended by more than 1,400 people while Egypt committed itself to creating its first national database of microfinance institutions. The Philippines organized a Microfinance National Summit where the Philippine Declaration on Microfinance was signed and a Memorandum Agreement on performance standards for microfinance institutions was introduced. For a week in early April 2005, France's National Committee held information forums in public places throughout the country for new entrepreneurs. On June 20th, 2005 President Jacques Chirac greeted an international crowd of 600 guests from all sectors at the International Paris Conference on Microfinance.

The academic sector has also been involved in expanding the knowledge on microfinance. Almost 100 top universities around the world have been active partners of the Year and have created microfinance coursework, competitions, and microfinance clubs.

Raising Public Awareness

In order to continue the effort undertaken throughout the Year, National Committees worked to increase public awareness of the immense potential of microfinance to alleviate poverty. Seventy-two countries organized 373 conferences, seminars and workshops and 71 countries established public awareness campaigns to highlight numerous important aspects of microfinance.

The internet has served as an important mechanism to spread awareness of microfinance and the activities of the Year. A total of 24 countries have created websites dedicated to the Year and its efforts. Different forms of media have been used to promote the Year throughout the world's regions. Benin held a debate on radio and television about microfinance, Guinea-Bissau organized radio debates in three national and regional stations while Colombia has incorporated the microfinance theme in one of its soap operas.

Beyond the traditional use of media to raise public awareness of microfinance, many countries have undertaken a broad range of creative activities such as publishing brochures, staging plays and establishing awards programmes. For example, Burundi staged a theatrical play while Mauritania organized a caravan to travel across 12 regional capitals. Nigeria, similar to countries in other regions, launched a commemorative stamp with the Year logo. The National Committee of the Philippines has been active in incorporating the Year in the daily life of its citizens by introducing a 20-Piso banknote with the imprint of the Year logo. The 20-Piso banknote is the most widely circulated note in the Philippines.

Several countries have held contests for recognizing those individuals that have contributed to the growth of microfinance in various sectors: for example Nicaragua presented journalists with honors at the "Journalists of Microfinance Awards".

Canada has officially dedicated October 20th, 2005 as National Microfinance Day, the first country to do so. Many high profile events took place in observation of the day, including an international panel conference in Ottawa and a microcredit toolkit launch in Vancouver.

National Committees at the International Forum for Building Inclusive Financial Sectors

Twelve National Committees received awards for their outstanding achievements during the United Nations International Forum for Building Inclusive Financial Sectors on November 7, 2005. Their innovative and inspiring achievements were recognized by Richard Weingarten, the Executive Secretary of the United Nations Capital Development Fund (UNCDF) and Christina Barrineau, the Chief Technical Advisor to the International Year of Microcredit. The winning National Committees included four members of the Organization for Economic Co-operation and Development (OECD), Canada, France, the Netherlands and the United Kingdom, and eight winner from developing regions: Benin, Guinea-Bissau, Madagascar, Morocco, Colombia, Indonesia, Mongolia, and the Philippines.

The National Committee winners were chosen based on criteria including membership diversity and partnership, creativity, effectiveness in communication and outreach, the level of governmental support, private sector engagement, and increased public awareness.

Richard Weingarten was especially pleased to honor the achievements of the National Committees and highlighted their collaboration with national governments in helping to meet the goals of the Year. "We have surpassed every goal that we have set throughout the year," he said. Mr. Weingarten called the representatives of the National Committees the real actors in building inclusive financial sectors at the national level.

Christina Barrineau enthusiastically announced that National Committees now span every region of the world. "More than half the world is covered with National Committees," she said, recognizing National Committees as the heart and soul of the effort to increase access to financial services.

The Legacy of the International Year of Microcredit

The Year's initiatives have created a clear commitment to building inclusive financial sectors at the national level. The National Committees continue to foster dialogue between the public and private sectors. The creation of microfinance funds has been undertaken by numerous major private banks. National governments are instituting laws that will serve to increase the outreach of the microfinance sector. Through their dedication and commitment to lasting change, the National Committees are proving to be effective catalysts to increasing access to financial services for poor people around the world and achieving the Millennium Development Goals.