MICROFINANCE MATTERS - Update on the International Year of Microcredit 2005

As the International Year of Microcredit reaches its mid-year point, there are many successes to record and activities to report from around the world. One major achievement was the establishment of the fiftieth National Committee in June. United Nations member states were encouraged to form National Committees at the onset of the Year to facilitate activities and create dialogue on building inclusive financial sectors. The National Committees are central to the success of the Year and the future of microfinance because they aim to engage country-level microfinance clients, local governments, Central Banks, UN Country Teams, private sector leaders and the NGO community to work towards improving the life of low-income entrepreneurs.

In the Middle East and North Africa (MENA), National Committees are hosting a range of activities to bring the issue of microfinance to the forefront of policy debates and planning. They are pressing for new legislation and commitment to microfinance as a part of larger poverty reduction agenda in the region, organizing workshops and conferences and distributing a variety of promotional materials.

Morocco's National Committee held its official launch event in February. The Prime Minister presided over the event and delivered opening remarks confirming the government's commitment to microfinance and poverty alleviation. In Jordan, the United Nations Development Programme (UNDP) and the Ministry of Planning and Cooperation dedicated a chapter of its third National Human Development Report (NHD) report to microfinance. The excitement generated by the Year encouraged the UNDP and the Ministry of Planning and Cooperation to make microfinance the theme of the entire upcoming NHD report, to be released at the end of the year.

Iran's National Committee worked with UNDP on a pilot poverty reduction/empowerment programme, "Social Mobilization and Microcredit," using UNDP's successful South Asia Poverty Alleviation Programme (SAPAP) model. The government recognized the accomplishments of the pilot programme and hopes to adopt it on a national level. Already, some large Iranian banks have provided consultation and expressed interest in future cooperation in microfinance projects.

MENA National Committees are getting the word out through conferences, workshops and partnerships with stakeholders across different sectors. On March 8, the Moroccan National Committee organized a conference, "Access to Basic Services Through Microcredit," with the help of UNDP, PlanetFinance and Federacion Nationale des Associations de Microcredit (FNAM). Hundreds of participants from microfinance institutions, the private sector and civil society attended the workshop. Iran's National Committee is also planning a workshop to promote and clarify the concept of "inclusiveness." Turkey's National Committee is organizing a national conference and planning to hold thematic workshops about microfinance. Members of the National Committees are bringing key institutions on board including the two largest banks, Ziraat and Halk Bank, government institutions such as the Banking Regulatory Authority and NGOs such as the Confederation of Craftsmen and Artisans.

Demystifying microfinance is especially important in MENA, where there is little tradition of credit culture and few formal lending institutions exist. To address these obstacles, MENA's National Committees are thinking outside the box. Turkey's National Committee plans to open a virtual Microcredit Information Centre. Brochures about microfinance are being distributed in Jordan, and the Year's Arabic-language public service announcement may soon hit the airwaves. These activities are creating excitement and new ideas about ways to address poverty in MENA.

To celebrate entrepreneurship and promote microfinance in the Arab region, the International Year of Microcredit, the Citigroup Foundation, the Sanabel Network, and the GMA Student Alliance have launched the Global Microentrepreneurship Awards (GMAs) in Egypt, Jordan, Lebanon and Morocco.

In Egypt, the country team, consisting of United Nations Development Programme (UNDP), Citigroup and Sanabel representatives have finalized the award criteria and categories. The award will be given to 12 individual microentrepreneurs. There will also be special awards for two solidarity groups, an award for innovations and ten awards to motivate the best loan officers in the country. The team will target all organizations engaged in microcredit in Egypt including commercial banks. The advisory council and the selection committee are being formed and will include key microfinance stakeholders. The team has started work on several marketing activities such as TV appearances, announcing the programme in the national newspaper, designing and distributing a brochure about the programme in both Arabic and English, and developing a pamphlet with the award winners' biographies. Moreover, UNDP Egypt is planning a media workshop in July to raise awareness among journalists and media professionals about the Year and the GMA programme and how they are celebrated in Egypt.

In Jordan, the country team has formally approached Her Majesty Queen Rania Al-Abdullah of Jordan, Emissary for the International Year of Microcredit, to chair the 15-member National Advisory Council consisting of some of the Kingdom's most prominent advocates of microfinance. A total of 16 awards and prize money totaling US$15,000 will go to the most innovative microentrepreneurs focusing on handicraft industries, services and small trade enterprises. The country team in Jordan includes representatives from Citigroup, Sanabel and students as well as management assistance from the International Women's Forum (IWF). The team is planning an extensive publicity campaign targeting the most progressive microfinance institutions in Jordan.

The country team in Lebanon consists of representatives from UNDP, Citigroup, Sanabel and the GMA Student Alliance. The team has decided on the key award criteria, which will include, but not be limited to, innovation, use of technology, improvement in quality of life and creation of new employment opportunities. The award will consist of 30 awards to microentrepreneurs and 10 awards to encourage active and dynamic loan officers, totaling 40 awards. The team has also formed an advisory council consisting of media professionals, academics, bankers and prominent businessmen. Over the coming period, the team will focus on promoting the Year and the programme among government officials, donors, NGOs and key microfinance stakeholders, including microfinance institutions, in order to nominate applicants.

In Morocco, a series of events and workshops have been organized to celebrate the Year and to launch the GMA programme. Moroccan microcredit associations will be nominating microentrepreneurs from their clients for the awards. The key criteria for the awards are innovation and social impact of the microentrepreneur. Two additional non-monetary award categories were added to celebrate and appreciate the work of loan officers as well as the team of student volunteers in the GMA programme in Morocco. Over the coming period, programme activities will focus on promoting the Year and the programme among the various stakeholders such as the government, the private sector, the media, the universities, NGOs, and donors. The national country team is led by UNDP Morocco with the participation of Citigroup Foundation and Sanabel as well as the Moroccan National Federation of Microcredit Associations (FNAM).

By Ghada Waly, Assistant Resident Representative, Job Creation and Poverty Reduction, UNDP Egypt

A true celebration of the International Year of Microcredit will take place in Egypt with the launch of the first national strategy for the microfinance sector. This launch will be the culmination of a year long consultative process with all relevant stakeholders; this process brought together donors, practitioners, experts and government officials, to create the first serious dialogue about the future of the industry in Egypt.

A Regional Leader - with Work to Do

For many years Egypt has been the leading Arab country in the area of microfinance, with the highest number of active microfinance borrowers and the largest outstanding portfolio, which was estimated at 400,000 clients at the end of 2004. Many Egyptian microfinance institutions (MFIs) adhere to best practices and have solid portfolios. But in spite of the impressive results of a leading few, the industry as whole remains relatively underdeveloped, and the huge potential demand for microfinance is still unmet.

To practitioners and donors, several problems were obvious at different levels. At the policy level, there has been lack of clarity in government policies regarding the commercialization of microfinance and a heavy reliance on donors. At the regulatory level, there is a lack of supportive infrastructure such as credit bureaus, rating agencies, and self regulatory frameworks to promote sector commercialization. On the institutional level, many MFIs suffer from weak management capacity and ownership structures, lack of transparency and lack of product diversification. Credit is generally the only financial product available, and it is mainly offered to men, for enterprise activities. Services like savings, money transfers, insurance and payment services are not provided by MFIs.

The Strategy-Building Process

The United Nations Development Programme (UNDP) and the United Nations Capital Development Fund (UNCDF) developed the project concept and asked the US Agency for International Development (USAID) and Germany's KFW to join in to fund a project to coordinate government efforts to develop a mature microfinance industry, capable of addressing the needs of poor people. This was based on the belief that permanent access to financial services for poor and low income households and their microenterprises will only be ensured through the development of the sector, and the recognition of microfinance as an integral part of the formal financial sector.

By focusing efforts on a strategy for the development of the industry as a whole, the project intended to define a framework for increasing the efficiency and effectiveness of concerted governmental, non governmental and donor actions in the sector. This framework will be based on a shared vision for the promotion of a self sustaining commercial microfinance sector, the articulation of a national policy and strategy to support necessary policy reforms, implementing legal regulatory changes that will be critical in developing financial infrastructure, and developing an action plan in coordination with the government to provide them with a menu of priority activities which donors might support.

A Multi-Pronged Approach

A number of research activities were conducted resulting in five investigative reports, which consisted of stakeholder identification, an institutional review, a legislative review, an institutional needs assessment of a number of MFIs, and a report on the private sector perspective.

In addition, seven roundtables were organized to bring together different players to discuss elements of the strategy. More than 250 stakeholders participated in the round tables and the discussion papers were distributed to a larger number. The topics included the role of banks, small and medium enterprise law, problems of collateral guarantees and recourse, non prudential regulation and performance standards, potential for new financial products, guidelines for donors support to the sector and strategies for capacity building.

Two study tours were conducted in Uganda and South Africa, which provided an excellent opportunity to exchange information and lessons learned. To many participants, the trips were a true eye opener. For five days in Uganda participants witnessed the strong role of the Central Bank in regulating the microfinance sector, received first hand information on Uganda's multi-tiered financial system, and visited organizations offering a variety of financial products.

In South Africa, participants examined non prudential regulation in action through a self regulatory body, and representatives of the Central Bank of Egypt visited credit bureaus, network apex institutions, banks, and training centers. Upon return to Egypt, participants produced reports on lessons learned and how they were applicable in the Egyptian case.

As a final step, the project held a workshop which was attended by over one hundred stakeholders. An outline of the strategy was shared with participants to reach agreement on the needs of the sector.

Egypt's Strategy Moving Forward

The output of the workshop, as well as the reports of the roundtables and study tours are all feeding the work that is currently taking place. A project team is working on the development of a policy document which will be launched in celebration of the International Year of Microcredit.

The strategy is outlining interventions at the micro, mezzo and macro levels and is built around the following core principles:

Lessons Learned

Some of the lessons learned are: engaging stakeholders, especially practitioners, in policy dialogue is quite challenging yet very crucial as they are the only ones who can validate assumptions. Another lesson is that many of the constraints are operational and cultural in nature and not policy related and it is very important to identify which is which. Government engagement is key; in this case, the government entity designated by law as responsible for microfinance, the Social Fund for Development, was skeptical at the beginning, but became quite engaged with time and even started to work on a larger strategy which will include non financial services for microentrepreneurs. Having the central bank as the national counterpart encouraged banks to participate in the round tables and the study tours. To conclude, the participation in the process was a learning experience in itself for the stakeholders.

On May 31, the International Finance Corporation (IFC) invited over 300 guests to take part in a forum entitled "Unlocking the Potential of Microfinance in the Middle East and North Africa," held in their Washington, D.C. headquarters. Among those in attendance were World Bank President Paul Wolfowitz and high-level representatives from the United Nations Capital Development Fund (UNCDF), the Consultative Group to Assist the Poor (CGAP), and the Foundation for International Community Assistance (FINCA).

Her Majesty Queen Rania Al-Abdullah of the Hashemite Kingdom of Jordan, Emissary for the International Year of Microcredit, called on leaders of the industry to strengthen the microfinance sector in the Arab world by expediting the establishment of viable and profitable microfinance institutions that offer diverse products and services. "One out of every five people in the Arab world is born into poverty," she said, adding that "too many people still work from dawn to dusk in the informal sector." She elaborated that these poor people "don't have access to savings account. They can't build credit histories."

According to CGAP, the MENA region currently has over 900,000 microfinance clients. Queen Rania, however, urged leaders to commit to expanding the reach of microfinance services to three million clients in the region and maintained that this goal was attainable, as demand for such access is high. "The needs are great. The partners are there. And the time to act is now. Let us change people's lives forever," she said. She further explained that by offering poor people "respect…responsibility…and a fighting chance…they will do far more for themselves than we can ever do for them."

Bridging the gap between the public and non-profit sectors to create a new breed of financial service providers who offer a wider range of financial services to the vast majority of poor people would produce a double-bottom line, "where serving shareholders and serving society are not trade-offs but tandem goals," said Queen Rania. She further explained that these new institutions would reach poor people while meeting high standards of business performance, thus "setting the pace and marking the score for larger banks to follow."

Working arduously to realize this vision, Jordan, in collaboration with CGAP and the G8, has established a regional technical hub and training program to help young Arab leaders develop their managerial skills. Her Majesty urged attendees to "accelerate this trend throughout the Arab world." She also highlighted Jordan's efforts to develop a five-year national strategy to expand the outreach of microfinance throughout the country and suggested this serve as a model for the region.

The demand for financial services in the region go beyond loans and capital, Queen Rania noted, further explaining "to build a bright future for the Arab world, microcredit on its own won't be enough… We need to establish inclusive financial systems that offer a full range of services including savings accounts, insurance, pensions, cash transfers, and more - the tools that enable resiliency, income generation and growth."

Her Majesty concluded her remarks by declaring "microfinance does more than help small businesses grow strong roots. It nourishes capable, resourceful people who are starving for opportunity."

Other speakers at the event included Peter Kooi, Director of Microfinance at UNCDF; Fouad Abdelmoumni, Executive Director of Association Al Amana and Advisor to the International Year of Microcredit; Rupert Scofield, Executive Director of FINCA; and Aftab Ahmed, Senior Manager of microfinance at IFC.

By Maura McGill, Robert F. Wagner Graduate School of Public Service, New York University

H.E. Mr. Rafael Correa, Minister of Economy and Finance, Ecuador and Chair of the Roundtable

On June 30, the United Nations Capital Development Fund (UNCDF) co-hosted an event with the Economic and Social Council (ECOSOC) to encourage the building of inclusive financial sectors in countries throughout the world. High-level representatives from over 23 countries attended and shared their ideas about the role of microfinance in their respective countries and in achieving the Millennium Development Goals (MDGs). Also in attendance were high level representatives of UNDP, UNCDF, the private sector, and academia.

The event began with remarks from H.E. Mr. Raphael Correa, Minister of Economy and Finance in Ecuador, and Co-Chair of the roundtable. "In order to achieve the MDGs, " he said, "we have to fight poverty, which is highly correlated to employment. One tool, especially for poor people, is microfinance." He further explained that many countries, such as Ecuador, already have microfinance mechanisms in place, but the challenge to improve and support these mechanisms remains. The public and private sectors have a responsibility and duty to the people, Mr. Correa noted. These sectors, however, view microfinance as costly and are therefore apprehensive about investing in the microfinance sector.

Tom Easton, New York Bureau Chief of The Economist and moderator of the event, posed two key questions: 1) What can the UN do to promote inclusive financial sectors and how would it help achieve the MDGs? 2) How can microfinance access be better included in a strategy to achieve the MDGs?

Mr. Easton gave the floor to H.E. Mr. Iftekhar Ahmed Chowdury, Ambassador Extraordinary and Plenipotentiary, Permanent Representative of Bangladesh to the United Nations. Mr. Chowdury explained that Bangladesh "is in the midst of a tremendous societal transformation because of ideas like microcredit." With a population of 140 million, Bangladesh now has over 20,000 microfinance institutions (MFIs). He stressed that microfinance can change the quality of life of poor people through access to financial services. Mr. Chowdury further remarked that a huge market exists for the private sector and urged them to get more involved in microfinance. It is also necessary, the Ambassador noted, to create a supportive legal environment with regulatory mechanisms "whereby NGOs will have their own access to banking systems" and can create a link between the banking system and microfinance on the ground level. He concluded that the UN's role can be "to identify best practices so that we can better transmit these services around the world."

Ms. Sri Mulyani Indrawati, State Minister of National Development Planning in Indonesia, highlighted Bank Rakyat Indonesia (BRI) as a successful intermediary between the micro-players and the banking system. While traditional banks encounter problems due to high associated costs, BRI has managed to grow and even survived the financial crisis of the 1990's, she said. As a result, the Minister continued, Indonesia is currently trying to replicate its microfinance system with US$6 billion allocated to small and medium enterprises. Ms. Indrawati urged the UN to build inclusive financial sectors by reducing asymmetric costs associated with information, creating cooperation, reducing overhead costs, and designing rules that are sensitive to the sector. The biggest challenge, she claimed, is finding the data of who the potential clients are, where they are, and how to reach them. The Minister concluded her remarks by stating that the legal regulations put in place for microfinance "are fundamentally disconnected and inappropriate for the sector" and that more appropriately designed regulations should be implemented.

Mr. Emilio Fernandez-Campo, Director General for International Economic Relations of Spain, argued that microfinance is not being used to its fullest potential, particularly where remittances are concerned. With over US$100 million per year in remittances being sent from Spain to other countries, the Director General urged the microfinance sector to create remittances products and services that would increase transparency, especially since most of the money is not sent through official financial channels. "We hear that remittance money is used for consumption, not investment. We're trying to create instruments to encourage flows to become profitable," said Mr. Fernandez-Campo.

Director General of the National Planning Commission in Namibia, H.E. Helmut K. Angula, explained that his country's experience with microcredit has not been rewarding. Financial institutions in Namibia have not been interested in investing in the microfinance sector because of poor returns, lack of collateral, and the small volume of clients. Due to variations in weather, rural lending has been largely seasonal with high default rate on loans, thus making microfinance a less attractive investment. Mr. Angula argued that the future success of the microfinance sector in Namibia depends on development assistance, which has dwindled in recent years due to ODA's classification of Namibia as a middle-income country, despite the fact that a large proportion of the population is employed in the informal sector.

Offering a different view of the role of microfinance in relation to the MDGs, Mr. Frederico S. Duque Estrada Meyer, Minister Plenipotentiary, Permanent Representative of Brazil to the United Nations, criticized the roundtable's enthusiasm for building financial sectors as "moving too fast." While he agreed that microfinance is important in achieving the MDGs, he argued that 'literacy, housing, education, health and the status of women" must be addressed first.

Jonathan Morduch, Associate Professor of Public Policy and Economics at New York University, remarked that the microfinance industry currently lacks the data necessary to determine how big the market is and who is being served. He pointed out that with regard to the MDGs, most MFIs are serving poor people, but not the poorest, who are the target of the MDGs. "We should celebrate the fact that microfinance serves those who are not the poorest," he said. Professor Morduch cited Ghana as an example where a concerted effort was made to combine healthcare with credit. An impact study of Ghana demonstrated a link between access to credit and improved immunization, household nutrition, female mortality, and treatment of disease. He concluded that "the solution for the MDGs is 'credit-plus'" programs such as the one in Ghana.

The event concluded with closing remarks by José Antonio Ocampo, Under-Secretary General for Economic and Social Affairs, who reminded attendees that the International Year of Microcredit 2005 is a great opportunity to mobilize and build the capacity of many actors that are crucial to the success of the MDGs. It can provide people with opportunity, especially when so many are informally employed and must borrow from moneylenders at high interest rates. Mr. Ocampo also highlighted future plans for the Year, including the launching of the Blue Book and the Data Project, coordination with National Committees to build inclusive financial sectors, and continued discussion on the future of regulation and legal frameworks within the microfinance sector.

For more information on the International Year of Microcredit, please visit: www.yearofmicrocredit.org.

By Maura E. McGill, Robert F. Wagner School of Public Service, New York University

On June 10, the United Nations Capital Development Fund (UNCDF) co-hosted an event with Wall Street women's groups to encourage the development and training of women in the US financial sector, increased access to investment capital for women, and the involvement of women in microfinance. Co-host organizations included the Women's Association of Venture Equity, which dedicates itself to the development of women professionals in private equity and venture capital and the Financial Women's Association and Women's Bond Club of New York, which promote the advancement of women as leaders in business and finance. Also sponsoring the event was 85 Broads, a network of former and current Goldman Sachs' women professionals and Women Advancing Microfinance, the only organization created for women professionals with careers in the microfinance sector.

Over 220 high level representatives from major banking institutions including Citigroup, Deutsche Bank, JP Morgan Chase, Merrill Lynch, Goldman Sachs, Lehman Brothers, Pricewaterhouse Coopers, Bank of America, Morgan Stanley, and American Express attended the breakfast to learn more about the financial investment viability of the microfinance sector.

The event began with opening remarks by Nane Annan, wife of Secretary General, Kofi Annan. Mrs. Annan spoke of her personal experiences meeting women in Kenya and Brazil, whose lives have been transformed through access to financial services. She stressed that these women "do not see themselves as charity cases, but as business women. I think this is how we should see them, too." Mrs. Annan explained that the International Year of Microcredit, with nearly half of the countries worldwide actively participating, "is a chance to highlight what women in poverty can do when given a chance, and the important roles that access to credit, savings, and other financial services play in their lives."

Following Mrs. Annan's remarks, Christina Barrineau, Chief Technical Advisor to the International Year of Microcredit 2005, described the Year's initiative to celebrate "poor and low income people and their contributions" through the Global Microentrepreneurship Awards (GMAs). Fatimata Lonfo was then introduced as last year's winner of the GMA in the United States. Lonfo, hailing from Côte D'Ivoire, spoke of her struggles in the war-torn country and her journey to America with her children in hopes of creating a better and more peaceful life. Blessed with a vibrant entrepreneurial spirit, Lonfo began a hair-braiding business from her home, accumulated small savings and went on to open her own clothing store in Staten Island with the help of a microcredit loan from ACCION New York. Lonfo explained, "my vision for my business is to find a financial assistant, to open a bigger store, and to extend the tailoring section to demonstrate my designing talent." Lonfo finished her inspirational story by proudly sharing that she was now able to send her children to a local university.

The rest of the event focused on a panel of microfinance experts, who offered their thoughts and opinions on the future of microfinance as a profitable and successful business investment. Tom Easton, New York Bureau Chief of The Economist, moderated the panel.

Tom Easton, New York Bureau Chief, The Economist; Jonathan Morduch, Professor of Public Policy and Economics at New York University

Jonathan Morduch, NYU Professor and author of recently published The Economics of Microfinance, provided a background on the history and evolution of microfinance and why it should be perceived as a successful business investment. He explained that the level of professionalism in the microfinance field is high and increasing and that the portfolio risk figures are well below 1%.

ACCION International President and CEO, Maria Otero, provided a brief overview of ACCION's mission to merge the non-profit sector with the commercial banking sector through both local and international community targets. She explained that ACCION "wants to make sure these banks maintain their social mission." In recounting the history of Bancosol Bolivia, Otero linked the relevance of making financial sectors inclusive with Wall Street's potential role in the microfinance sector. "Women, in part, could not even set foot in a bank and now they could choose between them," noted Otero. She highlighted how the awareness of the high demand for these basic financial services in poor communities spawned increased competition between institutions, which have become full service and regulated banks. She urged Wall Street to view the microfinance sector and its financial viability as a traditional business model.

CEO of Prisma Microfinance, Inc., David Satterhwaite, suggested that some are "doing damage in the field because they are propped up by donors," rather than receiving funding through investment. He added, "for microfinance institutions to become a lasting solution to global poverty they have to adopt financial strategies used on Wall Street. Given the potential returns, we expect investors will begin to see microcredit as a viable asset class."

Panelists (from left to right):
Tom Easton, New York Bureau Chief, The Economist (Moderator)
Jonathan Morduch, Professor of Public Policy and Economics at New York University
Maria Otero, CEO of ACCION International
Jack Lowe, CEO of BlueOrchard Finance S.A.
David Satterthwaite, CEO, Prisma MicroFinance, Inc.

Jack Lowe, CEO of BlueOrchard Finance, agreed that the microfinance sector must move away from debt financing and more into commercial financing. Mr. Lowe explained that there are three things investors are looking for when considering which projects are good investments: a safe and secure product, a highly professional organization and presentation, and liquidity. "We are just at the beginning of the relationship between the microfinance world and the traditional financial sector. This relationship will grow quickly from now on," said Lowe. He added that "the challenge is to be able to allow private capital to accompany the microfinance growth, and to do so with full confidence, reasonable return, and a real and tangible contribution to the developing world."

Following the panel discussion, the floor was opened up for a question and answer session. When asked if their organizations provide mentorship or training programs for clients, Mr. Satterthwaite said that Prisma provided strictly financial services. Professor Morduch added that many organizations view training and other efforts to broaden financial services as integral parts of microfinance. Mr. Easton suggested that the development of a new consulting model would address the issue of microfinance organizations having little time to provide both financial and training services.

One attendee inquired about average loan size and risk in microfinance. Mr. Lowe responded that average loan size varies and that while rate of return also varies, it averages around 2 or 3%. Professor Morduch then urged attendees to embrace the risk involved in microfinance because past risk might not indicate future risk.

In addressing a question regarding the difference between lending to men and women, Mr. Satterthwaite estimated that about half of Prisma's clientele is comprised of men, but on the whole, women tend to be better clients. Ms. Otero reminded the audience that women are among the poorest and have the fewest marketable skills. She emphasized that loan products must address these facts, yet should be marketed to both men and women.

The organizers hope that the meeting was a success in garnering more support from the financial sector for the International Year of Microcredit 2005 and for the recognition of microfinance as an integral part of the financial sector in the future.

For more information on the International Year of Microcredit, please visit: www.yearofmicrocredit.org

By Kristin Duchateau, Austrian Development Agency, and Christian Holger Strohmann, UNIS Vienna

On June 2, the United Nations Information Service (UNIS) Vienna hosted a symposium on "Promoting Financial Global Partnerships" in honor of the International Year of Microcredit. The meeting was held in cooperation with the Austrian Development Agency (ADA) at the Vienna International Center. The purpose was to discuss the issues facing microfinance institutions (MFIs) in the developed and developing world. The symposium provided insight into using microfinance as one effective tool for achieving the Millennium Development Goals in the context of the United Nations Secretary-General's report In Larger Freedom and in preparation of the UN Summit to be held in September. Panelists and participants also discussed the benefits of microfinance in different economic and political environments, and elaborated on best practices and innovative approaches.

The morning session was chaired by Franz Baumann, Deputy Director-General of the United Nations Office at Vienna (UNOV) while the afternoon session was chaired by Christian Strohmann, Officer in Charge of UNIS Vienna. Guided by the theme "Promoting Financial Global Partnerships for Development" delegates of government agencies, activists from non-governmental and civil society organizations, representatives of the financial sector, academia, media, and United Nations staff participated in a lively discussion of such issues as innovation and commercialization, with the goal of including all levels of society in the financial service sector. More than 80 participants and six panelists representing non-governmental organizations, government officials, staff members of the Vienna International Center, and the media were present for the Symposium.

Kathryn Imboden, Senior Policy Advisor, United Nations Capital Development Fund (UNCDF), introduced the International Year of Microcredit as it relates to the Millennium Development Goals, while Hermann Spirik, Director of Programmes and Planning of the Development Cooperation at the Austrian Federal Ministry for Foreign Affairs, explained the role of the Austrian government as a "niche player" looking for development of new financial products to alleviate poverty. Friedhelm Boschert, Chairman of the Managing Board of Volksbank International Aktiengesellschaft, showed his support for "the democratization of credit" and explained that "sustainable development is not only for the poor but with the poor." Hanns Martin Hagen, Vice President and Senior Financial Sector Specialist, KfW Entwicklungsbank, spoke about the role of development banks in supporting microfinance in crisis and post-conflict areas. Florian Grohs, Oikocredit International, then analyzed the role of NGOs in promoting global partnerships by highlighting lessons learned from South East and Eastern Europe. Mamadou Wane of North-South Solidarity Net explained how microfinance supports young people in his native Senegal to establish their livelihoods and turns them away from migrating to Europe or to the US. Following the panelists' discussion the audience was invited to participate in a question and answer round.

Participants were invited to attend one of two seminar sessions. The first seminar was about mainstreaming microfinance, and the second concerned microfinance investment funds, including topics such as "Ethical Investment - A Tool for Supporting the Poorest of the Poor". During the closing session, participants in the Symposium highlighted the "Global Marshall Plan" - a European initiative to further the achievement of the Millennium Development Goals. The plan urges governments to facilitate knowledge transfer from commercial banks to microfinance institutions and to better integrate financial tools for poor people into central banks and commercial banks.

In discussing microfinance as part of an inclusive financial sector, the panelists found that there is a need for support of green-fielding: establishing new MFIs; down-scaling commercial banks to serve the micro-segment; connecting MFIs with the national or international capital markets; and transforming credit NGOs into fully-fledged micro-banks. They further explained that an inclusive financial sector should include microfinance, SME finance (small and medium enterprises), capital markets and central banks. The panel found that knowledge transfer from the commercial banking sector to MFIs is necessary, as is creating a local currency risk fund to minimise foreign exchange risks for MFIs.

The panel concurred that microfinance can play a crucial role in post-conflict situations and after natural disasters and can be a vehicle to ensure maximum outreach to affected people. Creating competition in post-crisis countries brings interest rates down and serves poor people. They concluded that dialogue between commercial and central banks should be promoted as it leads to more outreach and an integrated approach, especially in rural areas. In order to promote the building of inclusive financial sectors on an international level, it is important to bring forward the UNCDF and UN-DESA Blue Book, a project addressing the challenges to building inclusive financial sectors so that concrete steps can be taken to make microfinance an integral part of a country's financial system.

Global interest in the International Year of Microcredit 2005 continues to grow. Many initiatives are underway to help meet the Year's objectives of promoting awareness of microfinance and building inclusive financial sectors. All of the initiatives undertaken by the Year are designed to encourage innovation and strategic partnerships. For more information, contact christina.barrineau@undp.org or visit our website at www.yearofmicrocredit.org.

An unprecedented global response to the call for building inclusive financial sectors is now underway, through the establishment of National Committees. Member states were requested to establish national coordinating committees to facilitate activities and to create a dialogue on best practices for building inclusive financial sectors in their country. Each National Committee assesses the challenges that poor people confront in accessing financial services and decides upon activities and initiatives to address these issues. Key factors that are stressed throughout this process include membership diversity and partnership, creativity, effectiveness in communication and outreach, the level of governmental support, private sector engagement, and increased public awareness.

To date over 90 countries in all levels of development have pledged their support to the International Year of Microcredit. National Committees or Focal Points had been established for 46 countries, comprising high-level representatives from 35 governments, 60 United Nations local offices, 41 multinational agencies, 177 microfinance networks, 13 central banks as well as key members of the private sector and civil society.

In each country the National Committee has a high degree of flexibility with the activities and events that are coordinated. Already hundreds of conferences and seminars have been planned throughout the Year and 27 countries have even developed a formal public awareness campaign to reach even the remotest region. Such awareness raising activities focus on introducing quality financial services to the poor and lower income people and are designed to reach a wide-ranging audience. Many governments realizing the benefits of microfinance have initiated innovative ideas at promoting the Year.

In November of 2004, the Global Microentrepreneurship Awards (GMA) successfully rallied the world to come together and highlight the achievements of and pay tribute to low-income entrepreneurs. It is in this spirit that the 2005 GMA Programme carries on. The overwhelming success of the 2004 pilot-event has led to a formal collaboration between Citigroup, the United Nations, and student groups from universities across the globe that is known as the GMA Student Alliance. More than 30 countries are participating in this year's award programme, bringing together thousands of microfinance clients, students, private and public sector professionals, senior government officials and UN agency staff. Similar to the 2004 programme, stock exchanges throughout the world have also pledged their support. This year over 30 stock exchanges will invite winning contestants to once again ring the opening bell, sending an even stronger signal to the world that building inclusive financial sectors can play an important role in poverty alleviation.

Country Teams have been created to design and coordinate the awards programme specific to each country. Country Teams consists of in-country and out-of-country individuals from the public and private sectors, UN agencies as well as students. The diversity of each individual team allows the contest to be designed in a manner that takes into consideration the unique nuances of the local business and economic environment.

Initiated by the Year, and led by the United Nations Capital Development Fund and the Office of Financing for Development of the United Nations Department of Economic and Social Affairs, the Blue Book on Building Inclusive Financial Sectors used an international dialogue among a wide variety of financial sector experts to address the question of "why so many bankable people are unbanked." Held throughout the Year, and culminating in a global meeting in May, the result will be presented to the General Assembly of the United Nations in September, and officially launched on November 8, 2005, at the Year Forum on Building Inclusive Financial Sectors.

Although there is a broad consensus that microfinance is widely and increasingly used, there is little hard data about who provides it, in what form it is provided, who receives it and at what cost. In the fall of 2004, the Year brought a small group of expert statisticians and researchers from the Bretton Woods Institutions and the United Nations together with governments and the private sector to address current data gaps, anticipate future needs and build agreement on the best way to move forward. As a result of this pioneering process, the World Bank and the UK's Department for International Development (DFID) have moved forward, along with the Central Bank of West African States (BCEAO), to develop indicators on the quality of financial access. Preliminary results will be launched on November 8, 2005, at the Year Forum on Building Inclusive Financial Sectors, as a critical first step in assembling this vital information.

A collection of 25 products, labeled with the logo of the Year, will convey to the public the importance of microentrepreneurs and will be sold through an "online boutique" on the website www.shopmicro.org. The chosen products will represent various world regions, male and female entrepreneurs, young and older craftspeople, various media as well as different market segments. The story of the product and artisan will be told in a pamphlet with the purchase of each product to illustrate the link to microfinance. National Committees and partner organizations are also invited to market and sell these products.

The online store currently has products from Macedonia, Colombia, Rwanda and Bangladesh. The store seeks involvement from microfinance institutional leaders, corporate partners and celebrities who will promote the products.

Microfinance Matters is a monthly web publication from UN Capital Development Fund that was started by the Secretariat in January 2004. The newsletter now reaches over 6,000 direct subscribers and expects to have a circulation of more than 10,000 by the end of 2005. In addition to our subscription list, the newsletter is also distributed through various microfinance outlets, reaching an estimated additional readership of well over 50,000 people worldwide. Microfinance Matters takes advantage of the Year to promote innovative partnerships, raise public awareness, and share effective practices and expertise on building inclusive financial sectors. By inviting reader opinions, the newsletter is developing into a platform for discussion and debate. Contributors to date range from Central Bank Governors to Ambassadors to microfinance clients.

The film short: "Microfinance: In Their Own Voices," a collection of client stories produced by Sterling Van Wagenen for the International Year of Microcredit, has been distributed to UN Information Centers and target broadcasters. The film is in demand from many parties, including National Committees, conference organizers, universities and others to promote microfinance messages. In addition, the Secretariat has offered input into a number of documentary film and television productions on microfinance. Films on microfinance produced for the Year will be made available on the Year website.

Public Service Announcements for the Year have been filmed featuring Aishwarya Rai, Anggun, Souad Maasi, and Karina. Anggun's PSAs aired at the Pavarotti and Friends Concert in Johannesburg, South Africa on April 2 to an audience of 20,000. The PSAs were produced by Citigroup and are available in English, French, Spanish and Indonesian. Citigroup has agreed to distribute the PSAs internationally with its advertising package. The PSAs will also be distributed through the Year website, microfinance providers, and National Committees throughout the world. Plans are underway for an additional promotion campaign through posters, postcards and decals and to secure additional mainstream celebrities to promote the objectives of the Year.

The Emissary and Spokespersons Groups raised awareness of the objectives of the Year starting with the launch event last fall in New York. Princess Mathilde of Belgium has participated in an array of activities including visits to microfinance clients in China, Mali, and India and speaking engagements at universities in Europe, Asia and the United States. Princess Maxima of the Netherlands recently visited entrepreneurs, MFIs and government and Central Bank officials in Uganda and Kenya. Anggun has engaged in promotional trips to Indonesia, performed in benefit concerts, and has promoted the logo of the Year on her most recent album.

The official website of the Year (www.yearofmicrocredit.org) provides extensive information about the Year, its objectives and activities, National Committee contact information and a calendar of national, regional and international events. The site serves newcomers to microfinance, industry practitioners, UN country teams and agencies, and donors. Organizations may link to the website (guidelines on how to do this are available on the site). The site also includes multiple languages to support our international audiences. Key areas include an events calendar, media resources, an interactive microfinance education area, an experts forum, international contact information for all Year country teams, and information about key sponsors and patrons group.

Hundreds of microfinance meetings, conferences, forums and other events are being organized and scheduled to celebrate the Year and raise debate on how to improve financial services for those people living in poverty. Please see the official Year website (www.yearofmicrocredit.org) for an updated calendar of events and activities.