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UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance |
Issue 2 / March - April 2004 |
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News | G8 Focuses on Microfinance at Annual Meeting Summit Produces Action Plan for Promoting Entrepreneurship By Kyle Cheney At this year’s Group of Eight (G8) summit, leaders of eight of the world’s most economically influential countries—Canada, France, Italy, Japan, Russia, England and the United States—met and discussed ways to meet the United Nations first Millennium Development Goal (MDG) of significantly reducing poverty, among other coordinated international tasks. Though many feared that talk of the war in Iraq would overshadow the G8’s other purposes, the countries produced a plan, “Applying the Power of Entrepreneurship to the Eradication of Poverty”, to further poverty alleviation and expand microfinance throughout the world. Much of the plan focuses on remittances from immigrants to their home countries, which leaders hope will someday be a significant source of capital used to launch or support small businesses. The G8 expects that if families can keep more of the remittance money they receive, they will invest it productively. Currently, remittance fees are overly costly, often as much as 20 percent of the total transferred amount. Economists have also noted that while other forms of capital tend to fluctuate depending on the political and economic climate of the day, remittances tend to remain a constant, steady source of funds. The World Bank estimates that remittance receipts totaled over 88 billion in 2003. The eight countries agreed to make remittance flows from one country to another freer and simpler by reducing these costs. The leaders devised six key actions to ease the transfer of remittances that include: promoting competition, creating easier access to formal financial systems, providing a greater range of options for remittance-receiving families and supporting cooperation and dialogue between all sectors of society—from governments to private businesses to microentrepreneurs. And while remittances were prominent in the initiative, it also discussed providing loans and credit for poor and low-income people “Entrepreneurs, no matter how small, need access to capital,” the plan reads. In addition to the solutions it offers, “Applying the Power of Entrepreneurship to the Eradication of Poverty” states that G8 countries will act in accordance with microlending principles established by the Consultative Group to Assist the Poor (CGAP). CGAP’s principles determine that proper microcredit practice involves: establishing a range of financial services for the poor—not merely loans—, creating a permanent, sustainable role for microfinance in developing financial sectors, and defining government’s role as “an enabler, not a direct provider of financial services.” Another core principle, however, is to acknowledge microcredit’s limitations. “Microcredit is not appropriate for everyone or every situation,” the sixth principle reads. “The destitute and hungry who have no income or means of repayment need other forms of support before they can make use of loans.” According to a Summit report, the U.S. already has active microfinance programs in 58 different countries and has facilitated lending more than $2.5 billion, 40 percent of which has gone to women. And now, as a result of G8 developments, the US has stated that this program will grow. The eight leaders also discussed
solutions to HIV and polio, famine and agriculture failures, the Middle East,
and environmental concerns. The G8 action plan entitled,
“Applying the Power of Entrepreneurship to the Eradication of Poverty”
is available at: http://www.g8usa.gov/d_060904a.htm
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