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Ringing in the Year of Microcredit by UNDP Administrator Mark Malloch Brown
The Global Microentrepreneurship Awards (GMA) Programme
Blue Book on Building Inclusive Financial Sectors - Africa Multi-Stakeholder Dialogue
Notes from the National Committees:
National Coordination Committee Established in Azerbaijan
The Central African Republic Devotes the Week of November 18, 2004 to Launching the International Year of Microcredit
Ringing in the Year of Microcredit
by Mark Malloch Brown
The International Year of Microcredit is more timely than any of us could have forseen, given the desperate need in Indian Ocean countries for the tsunami survivors to rebuild their lives, businesses and communities. Microfinance will be essential in this rebuilding process.
Microfinance is among the best tools we have today to alleviate poverty because the world's poor and low income entrepreneurs do not want charity. They do not lack energy, work ethic, ideas, or entrepreneurial spirit - what the world's poor people lack is access, and choice. And that is exactly what microfinance provides.
Access and choice mean that poor people have the opportunity to fulfill their own dreams for a better future. Through activities such as the Global Microentrepreneurship Awards and the promotion of "Made by Microentrepreneur" products, the Secretariat of the International Year of Microcredit and National Committees around the world are putting the voices of microfinance clients at center stage. And the Year has attracted world famous entertainers who will promote this message through music, film and television.
The Year is also about the serious task of building inclusive financial sectors by identifying and overcoming the barriers that keep bankable people from entering the formal financial sector. It has engaged a distinguished array of Advisors who will oversee the execution of landmark efforts, including the leaders of some of the world's largest and smallest financial institutions - all focused on breaking down the barriers that prevent people from receiving good, quality, safe financial services.
One of the first major hurdles is the lack of data on who has access to financial services. With the Year's Data Project, the World Bank, the International Monetary Fund and the United Nations have joined forces to develop indicators of financial industry depth and quality of financial services available to poor people throughout the world - with the goal of increasing market outreach, and allowing countries to benchmark their financial sector's performance within the global context. Another project, the Blue Book, will examine the question of why so many bankable people are unbanked, by addressing the constraints to building inclusive financial sectors. And the Year has secured the support of prestigious and generous core sponsors, whose participation is vital to the pursuit of such an ambitious agenda.
These initiatives lay the groundwork for the Year of Microcredit to make extremely important contributions to the development of microfinance, and the achievement of the Millennium Development Goals. From the involvement of students to professors, from heads of state to poor clients, from grassroots NGOs to mainstream financial institutions, the microfinance movement is gaining momentum. Much has been accomplished, and much is left to do.
The Global Microentrepreneurship Awards (GMA) Programme
Celebrating Entrepreneurship
In the spring of 2004, the Citigroup Foundation, the United Nations Capital Development Fund (UNCDF) and a group of students from Harvard, Columbia, New York University, Yale, Wharton, Tufts, and other universities (the GMA Students Alliance) joined forces to highlight the achievements of 4 billion poor and low-income entrepreneurs around the world. In response to the International Year of Microcredit 2005, students and professionals around the world rallied to pilot the 2004 Global Microentrepreneurship Awards (GMA) Programme.
The objective of the Global Microentrepreneurship Awards GMA Programme (GMA) is to illustrate and celebrate the entrepreneurial spirit within impoverished communities. The GMA Programme recognizes the global contributions made by microentrepreneurs across diverse backgrounds and industries as they strive for economic stability for their families and their communities. This initiative is committed to fostering investment in microfinance from individual donors, governments and the private sector, and seeking increased recognition for microentrepreneurs as valuable business clients.
In addition to the university-affiliated volunteers, the GMA Students Alliance running the GMA Programme enlisted the help of 13 stock exchanges around the world to give microentrepreneurs the opportunity to announce the launch of the International Year of Microcredit by ringing the opening bells on November 18th 2004. Stock exchanges from Mumbai, India to New York's NASDAQ were opened by microentrepreneurs as a demonstration of their importance to the world economy.
To date, the GMA Programme has been implemented successfully in eight countries (Afghanistan, Cambodia, the Dominican Republic, Indonesia, Mexico, Mozambique, Pakistan, and Rwanda) plus New York City. Prize winners ranged from Fatimata Lonfo, who owns a clothing boutique and hair braiding salon in New York, to Lize Nhaca, owner and manager of a small fishing enterprise in Mozambique. In addition to monetary benefits, participants have gained greater visibility for their businesses, access to greater peer microfinance networks, knowledge-sharing of local resources, and important management and business skills. The success of the pilot GMA Programme has put it on track to expand into 22 additional countries this year in Africa, Asia, Europe, Latin America, and the Middle East. It continues to be led by UNCDF, Citigroup and the GMA Students Alliance while also involving in-country microfinance networks and volunteers.
This year UNCDF is pleased to introduce Ms. Carola Saba as Coordinator for the GMA Programme. Carola played a key role in the pilot GMA Programme by coordinating the New York awards, which involved 24 microfinance institutions and 7 finalists. The New York awards culminated in a ceremony at the NASDAQ stock exchange to launch the International Year of Microcredit.
Chip Raymond, President of the Citigroup Foundation added, "As one of the founding members of the Global Microentrepreneurship Awards, Citigroup is committed to ensuring the success of this important programme. We are delighted to welcome Ms. Saba whose knowledge and experience are a great addition to the GMA Programme team."
How Can You Get Involved?
Whatever your background, this initiative will give you a concrete opportunity to contribute to the alleviation of poverty by becoming a promoter and facilitator of entrepreneurship. Following are examples of activities organized for every country with the direct support of UNCDF, Citigroup and the GMA Students Alliance.
- Design the unique characteristics of the contest including: determining the client revenue ceiling and prize amount, the criteria for selecting the winners, the process for recruiting and inviting judges, and the target number of applications that the final judging panel will receive.
- Design and implement national media campaigns including: generating media interest via press releases, print ads, news articles, and special surveys about the GMA Programme, the International Year of Microcredit, microfinance, and/or microentrepreneurs.
- Secure additional national-level sponsorship including: in-kind donations (such as printing and signage), transportation to/from the contest and consolation prizes for finalists, (such as computers, cash registers, calculators, ledger books, or other useful business tools).
- Organize logistics for the pre-launch and the awards ceremonies including securing the venue, catering, printing, and other necessities for the awards ceremony.
By becoming involved in this initiative with UNCDF, Citigroup and the GMA Students Alliance you can help alleviate poverty while at the same time bolstering your experience and gaining important knowledge about microfinance. We will have Country Teams in place by the end of February. If you are interested in volunteering or would like more information on the GMA Programme, please contact Bhakti Mirchandani at bmirchandani@mba2005.hbs.edu or Carola Saba at carola.saba@undp.org
Blue Book on Building Inclusive Financial Sectors
Africa Multi-Stakeholder Dialogue - Bamako, MALI
By Stephanie Narquin
The "Blue Book on Building Inclusive Financial Sectors" project is an innovative consultative process. The objective is to identify constraints to the extension of financial services in developing and transition economies. The dialogue and debate take place around a set of key questions built around the issue: "Why are so many bankable people unbanked?" The results of the inquiry will be presented in a report, "Blue Book on Building Inclusive Financial Sectors," to be widely disseminated in the second half of 2005 for consideration by national governments and other stakeholders.
The annual conference of the Africa Microfinance Network (AFMIN), December 6th to 10th in Bamako, Mali, was an ideal opportunity for dialogue with microfinance stakeholders: a fundamental part of the "Blue Book" consultation process. Organized in collaboration with APIM Mali (the national microfinance network), the United Nations Capital Development Fund (UNCDF) and the United Nations Department of Economic and Social Affairs (UNDESA), the conference's topic was on "increasing microfinance effectiveness and outreach in Africa." It brought together representatives of national governments, central banks, microfinance practitioners, microfinance networks, donors and investors. The Blue Book project was associated with this conference to address the challenges to building inclusive financial sectors.
AFMIN is a practitioner-led association of microfinance networks in Africa created in 2000. Its mission is to contribute to the provision of effective and sustainable financial services to poor people in Africa. It is based in Abidjan, Ivory Coast and now includes thirteen countries of the Africa region. Twenty-three African countries were represented at the Conference along with seven donor countries.
During a two-day "multi-stakeholder dialogue," participants addressed a set of questions and shared their experiences on:
- Actions to increase demand for financial services,
- Actions to improve supply of financial services,
- Actions to improve outreach and effectiveness of financial services.
Following keynote presentations on these themes, participants dug into the issues of the demand, supply and policy considerations. The following are the main conclusions of the dialogue.
Actions to increase demand for financial services
- The greatest gaps and factors that affect demand identified by the participants are the lack of clients' product understanding, confidence in institutions, and the ability to repay loans. Cultural, gender and sometimes religious factors, geographic isolation, the lack of economic opportunities, and the absence of a system to monitor clients' needs also influenced demand.
- It was recommended that all stakeholders focus more on the needs of their clients; that financial institutions focus on developing and promoting client specific savings services, and not just on loans; that the private sector offer longer term financial resources; that donors and investors share risk, test new products, support organizational development, and allow more time for MFIs to achieve financial sustainability; and that policy makers provide a supportive environment for MFIs to work in marginalized areas or with marginalized groups of people.
Actions to improve effectiveness and sustainability of microfinance provision
- The most significant factors that influence supply identified by the practitioners covered a wide range of concerns: the cost of outreach due geographical factors (low population density), the lack of providers' understanding of their clients and the inability to adapt to their clients' needs, lack of client information, under-performing management information systems, and inadequate access to financial resources.
- The strategic actions to be taken are to diverge from the "one size fits all" product approach to better understand clients' needs and develop relevant products, to promote savings among clients, to improve transparency and reporting, to encourage knowledge sharing among MFIs and to develop infrastructure to establish a "mobile financial system."
- It was recommended for financial institutions to insist on attaining sustainability and institutional capacity building as well as to develop better marketing approach; for the associations to build capacities in their networks; for the private sector to develop partnerships with MFIs; for the donors to better coordinate funding and for the technical support sector to develop better market research as well as to develop new products.
Policies and strategies to improve outreach and effectiveness of financial services
- Regarding the policy, legal and regulatory issues, the key factors that constrain the expansion of effective financial services are the perception by policy makers of microfinance as a charitable activity, the lack of strategy and policy for the financial sector overall, interest rate ceilings, a tax system biased against microfinance, the lack of property rights. Further considerations included the lack of support from the government for capacity development, the use of microfinance for political means, and the lack of coordination among donors.
- Based on these discussions, the participants agreed that policy issues should be focused on three strategic axes: first, reinforce the regulatory and institutional framework; second, professionalize MFIs and third, increase coordination among MFIs, banks and private investors, sharing information between and among stakeholders.
Conclusion of the AFMIN meeting
At the conclusion of the AFMIN Annual Meeting, participants agreed on the following:
- Microfinance is part of National Financial Systems. Microfinance should definitively be accommodated as part of formal national financial sectors. Microfinance policy should not be fragmented and dispersed among other development programmes such as health, education, employment, etc., but be considered an integral part of the developing financial sector, whose function should be to provide the whole population, including the least-well-served poor, with access to appropriate financial services.
- A perception change is needed: microfinance is not charity. A change in the perception of microfinance from a poverty or development programme to a standard financial sector component will help to encourage sound practices, professionalism and sustainability of microfinance, and avoid market distortion and pitfalls. The perception and adoption of a financial sector approach at policy level assumes, however, that other microfinance stakeholders also look at the financial sector globally. They should address overall financial sector development in diagnosing the microfinance sector and its constraints and opportunities.
- Importance of networks in financial sector approach. Processes should be put in place at the country level to help mobilize microfinance stakeholders to develop a common vision and put together a strategic action plan and budget. Conference participants acknowledge in that respect that AFMIN and country level networks have a key role to play in helping improve the related processes, define the required framework at the national level and develop the appropriate system to provide effective and sustainable financial services to the low income population.
The results of the Bamako multi-stakeholder dialogue will be incorporated into the Blue Book on Building Inclusive Financial Sectors. For more information, please contact us at bluebook@uncdf.org
National Coordination Committee Established in Azerbaijan
The Government of Azerbaijan celebrated the launch of the International Year of Microcredit 2005 (the Year) by implementing a diverse set of activities in the country to promote micro and small business in the region. These activities included a conference, seminars and round tables, and credit fairs, but the most significant activity was the formation of Azerbaijan's National Coordination Committee for the Year. Held on December 22nd, 2004, the founding meeting included representatives of UNDP, the Ministry of Economic Development, the Ministry of Youth, Sport and Tourism, the Ministry of Labor and Social Protection of Population, the Ministry of Education, the Azerbaijan National Bank, the Azerbaijan Microfinance Association, the World Bank, the Asian Development Bank, the European Bank for Reconstruction and Development as well as members of the credit organisations, civil society and the media. In the opening speech, the Director of National Entrepreneurship Support Fund highlighted the importance of the Year in promoting microfinance and improving the financial market in order to achieve sustainable economic development. It was also emphasized that the participating organizations are interested in building an inclusive financial sector throughout the country.
By founding the National Coordination Committee and by giving the Azerbaijan Microfinance Association official NGO status, the government of Azerbaijan acknowledges that microfinance is a powerful tool in the fight against poverty. To contribute to the success of the Year, the Committee has already set up a detailed action plan of events to take place during 2005. The first meeting of Azerbaijan's National Committee was a great success, and paved the way for the success of the International Year of Microfinance in Azerbaijan.
The Central African Republic
Devotes the Week of November 18, 2004
to Launching the International Year of Microcredit
The Central African Republic organized a series of events during the week of 18 November, 2004 to celebrate the launch of the International Year of Microcredit. The week's events were sponsored by the Ministries of the Economy, Development, Finance, Budget, and International Cooperation, and included an official launch ceremony, three conferences, a round table, and awareness-raising activities through sketches and radio and television messages. These activities attracted strong public participation, particularly among women's groups. The first conference was held for microfinance stakeholders, and examined obstacles to microfinance in the region. The second conference raised awareness among students and professors about microfinance and its role in reaching the Millennium Development Goals. The third conference addressed the issue of women and rural finance, with the participation of FAO and UNICEF. The Cameroonian organization Mutuelle financière des Femmes Africaines presented the experience of a cooperative of very poor women. At the end of the week, thirteen recommendations were made including establishing a national policy on microfinance, forming strategic partnerships with donors and the private and banking sectors, creating better products for the poor, especially women, and lastly, strengthening the capacity of microfinance institutions.
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