UNITED NATIONS CAPITAL DEVELOPMENT FUND    Microfinance

Issue 2 / March - April 2004

Spotlight

Update on the International Year of Microcredit 2005

Featured Guest

Q&A with Ambassador and Permanent Representative of Bangladesh to the United Nations, H. E. Dr. Iftekhar Ahmed Chowdhury

News

Microfinance in focus

Voices of Microfinance

Responses to a question posed to experts and practitioners.

Upcoming Events

Conferences, events and trainings.

Links

New websites and publications.

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If you have a current news story or know of an upcoming event that would be of interest to the network, please email the Editor, Emily Krasnor.

Spotlight

Dear Colleagues,

A quick up date on the Year of Microcredit 2005:

Since being appointed joint coordinators for the Year, UNCDF and UNDESA have been working to design the strategy, establish systems and build momentum for the Year.

To begin with, our two organizations have formed a Coordinating Committee, chaired and co-chaired by Mark Malloch Brown, Managing Director of UNCDF and Jose Antonio Ocampo, Under-Secretary General UNDESA respectively.

The Coordinating Committee has endorsed “Building inclusive financial sectors” as the official tagline for the Year of Microcredit and we encourage all events and activities, national committees and microfinance partners to adopt this phrase in their promotional efforts for the Year.

We anticipate that our official website for the Year will be operational by April 2004.

November 18, 2004 has been designated as the official launch date for the Year of Microcredit. We a seek a global effort on behalf of all those committed to microcredit and microfinance to work together to make the launch of the Year monumental in impact. Our vision is that, starting with the New York Stock Exchange, all national and regional stock exchanges around the world are opened by microcredit and microfinance clients. We invite all national committees to take an active role in achieving this ambition. For more information on this effort, please contact Bhakti Mirchandani at: bmirchandani@mba2005.hbs.edu.

At the Headquarters of the United Nations in New York, the launch date will be marked by an opening ceremony, a day of substantive panels, open houses, the premier of a documentary on microfinance and other celebratory events in the evening. We encourage national committees and microfinance partners to collaborate and prepare for this occasion and to use the date as an opportunity to draw special attention to the importance of microcredit and microfinance in our collective efforts to achieve the Millennium Development Goals.

A letter was sent to all Member State governments/missions and UN agencies in early January on setting up National Committees to observe the Year from the Secretary General. I encourage you to work in collaboration with your government to set up a National Committee. In addition to coordinating efforts throughout the Year, these Committees are encouraged to organize events to celebrate the launch.

Below please find a short summary of the organization, themes, and objectives for the Year. More information, including a concept paper that will include extensive information on suggested activities for the Year will be made available soon – check the UNCDF website for updated information.

We look forward to hearing about your activity plans for the International Year of Microcredit.

Best regards,

Christina Barrineau, Chief Technical Advisor -- Year of Microcredit

Key Points:

• The United Nations has declared the year 2005 to be the Year of Microcredit
• UNCDF and UNDESA will jointly coordinate the activities of the Year
• The Coordinating Committee (UNCDF and UNDESA) will be chaired by UNCDF (UNCDF will host four full time staff to make up the secretariat for the Year that will serve the Coordinating Committee)
• The Committee will be chaired by UNCDF Managing Director, Mark Malloch Brown, and co-chaired by Jose Antonio Ocampo, Under-Secretary General, UNDESA
• The Coordinating Committee will establish a diverse Patrons Group to provide advice and leadership, and act as spokespeople for the Year
• Member States have been invited to establish National Committees to plan and implement activities for the Year
• 2004 is a year of preparation
• The Year will be formally launched 18 November 2004 – the plan is to celebrate the launch of the Year by having stock exchanges opened around the world by microfinance clients
• A website for the Year will be up by April 2004
• A Concept paper and guidelines for the Year will be available in late March 2004
• Citigroup and the United Nations Foundation are the first core sponsors to fund the secretariat

Strategy and Action Plan

The United Nations has declared the year 2005 to be the Year of Microcredit and has designated the United Nations Capital Development Fund (UNCDF) and the United Nations Department of Economic and Social Affairs (UNDESA) to jointly coordinate and prepare for the observance of the Year.

The mission of the Year is to promote and give momentum to sustainable microcredit and microfinance worldwide; highlight its contribution to the achievement of the Millennium Development Goals; and build inclusive financial sectors that help people improve their lives.

The five key objectives for the Year are designed to unite Member States, UN Agencies and Microfinance Partners in their shared interest to build sustainable and inclusive financial systems and achieve the Millennium Development Goals (MDGs). The objectives are to:

1) Assess and promote the contribution of microfinance to the MDGs
2) Increase public awareness of microfinance as a vital part of the development equation
3) Promote inclusive financial systems
4) Support sustainable access, and
5) Encourage innovation and new partnerships.

The strategy for the Year seeks to build a network among Member States, donors and UN Agencies, as well as the broad scope of current and potential Microfinance Partners. The Coordinating Committee will act as a facilitator or broker, linking institutions on subjects of common interest and attracting new actors to achieve the Year’s objectives.

The institutional arrangements will include a joint UNCDF-UNDESA coordinating committee, served by a small secretariat hosted by UNCDF.

What’s more, the Coordinating Committee will undertake specific activities focused on achieving the objectives of the Year and intended to encourage, promote and lend support to the activities of National Committees and regional and international partners. Activities are concentrated in four main areas: Communication, Special Events, Partnership Engagements, and Reports.

The Coordinating Committee will develop guidelines, solicit proposals, endorse and work closely with organizers of up to 25 global, multi-stakeholders initiatives. Guidelines for proposals will be available by the end of March 2004.

The Coordinating Committee will also work to graft the theme of “Building Inclusive Financial Sectors” onto major conferences, events, action plans and national committee and institutional strategies.

The Coordinating Committee will establish a diverse, high-level group of Patrons to the Year. In addition to influential spokespeople, the core will comprise a wide range of representatives who will advise the Coordinating Committee on substantive issues and assist in connecting with a broad constituency for the Year, namely, Member States governments, UN agencies and donors, private sector, academia, NGOs, direct microfinance providers, and civil society.

With input from the Group of Patrons, the Coordinating Committee will draft guidelines to assist partnership groups in making maximum use of the Year. These guidelines will be prepared in late March 2004.

Vision

Microfinance has been in existence since the beginning of trade. Many actors around the world are intensely involved in designing and implementing tools, methodologies and systems that address the inequities of current financial systems in meeting the needs of poor and low-income clients. It is universally agreed that the provision of financial services to poor people is complex and requires prudence in its promotion.

The Year of Microcredit observance provides a significant opportunity to raise awareness about the importance of microfinance, and in particular microcredit, in the eradication of poverty, and to further enhance existing programmes that support sustainable, inclusive financial sectors around the world.

There is little argument that international, regional and national efforts that support microfinance have already contributed directly to achieving the objectives of major conferences and summits as well as the Millennium Development Goals—in particular the goals related to halving the proportion of people living in extreme poverty by 2015. Comprehensive impact studies of microfinance have demonstrated that 1) microfinance helps poor households meet basic needs and protect against income fluctuations and other risks, 2) the use of financial services by low-income households is associated with improvements in household economic welfare and enterprise stability and growth, 3) by supporting women’s economic participation, microfinance empowers women, thus promoting gender-equity and improving household well-being, and 4) the magnitude of impact is positively related to the length of time that clients have had access to financial services.

With unmet demand for microcredit estimated at 400 to 500 million poor and low-income people worldwide, the sector still has a long way to go to fulfill its potential. The encouraging news is that tens of millions of clients are currently being served, and their numbers have been growing by between 25 and 30 percent annually over the past five years. Although the sector has grown and commercialized significantly during that period to manage rapid expansion, demand still far exceeds supply and capacity.

To guide the awareness building activities of the Year, and to ensure that the activities of the Year go beyond promotion to produce substantive outcomes, a central question must be addressed:

What are the prudent actions that the global community can undertake to dramatically increase financial service access, and thus ensure that microcredit and microfinance can be used most effectively to contribute to the achievement of the goals of the Millennium Development Declaration?

The Year of Microcredit 2005 provides a unique opportunity for the international community to address this question, scale up efforts and build industry capacity to meet the underserved demand. Through the Year, we are presented with a platform to advance private-public partnerships that will promote inclusive financial systems, sustainable private sectors and self-determining communities. The Year offers a challenge to Member States, UN Agencies and major Microfinance partners to work together to assess and promote the power of microfinance to change the lives of people living in poverty and contribute to the achievement of the Millennium Development Goals.