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UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance |
Issue 16 / September 2005 |
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Featured Guest: Mr. Salil Shetty, Director of the Millennium Campaign
Q&A on Microfinance and the MDGs 
The MDGs were signed at the global level; they were agreed upon at the Millennium Summit in September 2000 and again confirmed at the International Conference on Financing for Development in March 2002. But the key element is that once the Goals have been signed at the global level, leaders go back to their own countries and translate the global agreements into national plans, commitments, strategies and budgets. So the first question people should raise is: has that happened? If it's a rich country, then people should be sure that commitments in aid, debt and trade are actually translated into national plans, budgets, resource allocations, etc. For developing countries, you have to go back to see if this has been translated into national development plans, national development strategies, and budgets which are in line with achieving nationally defined goals. The global goals are meant to be adapted to the national level. And that is really the key demand people should make of their governments - to make sure that these commitments are translated into action.
I think there are sub-Saharan African countries which are on track to meeting specific MDGs by 2015, however, very few countries are likely to meet all their MDGs by 2015 at the current trajectory. But we have to remember that this is on a business-as-usual basis. Our whole take is that we've made this commitment, we know that things are not going at the speed at which we would like them to be going, so [the 2005 World Summit] next week is an opportunity for leaders. So is the World Trade Organization Ministerial Conference in Hong Kong in December. And in between we have the annual meetings of the World Bank and the International Monetary Fund (IMF) - we don't see the Summit in isolation from the series of events which are happening in 2005. Really there is no reason why the Goals can't be achieved in the next ten years. Take Egypt, for example. In eight years time, they were able to halve their maternal mortality rate. And maternal mortality is one of the slowest indicators to change; normally it's a very difficult one to achieve. So, we still believe the MDGs are attainable, but not if we go about them in a lackadaisical way. If we really step up, increase the pressure, and get serious about it, it's still doable. But definitely not in the way we are moving now. We need a step change.
Firstly, we see the Goals very much as part of the broader development agenda. The good thing about the Goals is that they are very specific, measurable, and time-bound, so they offer very concrete benchmarks. In terms of strategies, we work with a very wide range of partners because the mandate for the Campaign is to enable citizens to hold their own leaders to account for the achievement of the Goals. We don't campaign directly, what we do is to support citizens' actions in different parts of the world. We study faith groups, trade unions, NGOs, women's groups, youth groups - and interestingly, more and more local governments, local authorities and parliamentarians are getting quite engaged. The other key partner is media. So we work with all these folks to push the agenda ahead. For example, we have partnerships with MTV, with BBC, so we've created a series of messages, of products which have been aired across the world now. At the national level there are different campaigns; this last weekend alone we had two major music concerts as follow up to Live 8 concert which happened in July of this year before the G8. Before the World Summit, on the 3rd of September, we had massive concerts in Accra in Ghana, and a huge concert in Delhi. These are what we are calling people's concerts against poverty and people's summits against poverty. So we are using a whole range of methods and strategies, but it's not a centrally command driven campaign. It's very viral, people do it the way it makes sense to them. We are using the white band as the icon of the Campaign so people are very clear to wear the white band in different parts of the world. A very visible campaign has been the UK campaign for the MDGs Make Poverty History. In the US, we have the One campaign. So each place is different, different names, different context, different demands, very nationally adapted just like the MDGs should be.
Yes, the Millennium Project is a Columbia University set of advisors who produced the report Investing in Development, and they have done their job. Really what's happened is the more relevant discussion is about the In Larger Freedom document which has gone into negotiations for the World Summit and that has pretty much been overtaken by the Outcome Document which is under negotiations right now. So we are following that pretty closely in terms of intergovernmental process. We hope that at a minimum, the commitments that have been previously made will be upheld and that on particular issues they will go further than just committing the minimum. But our biggest concern right now is trade, because trade is the one area where, unlike aid and debt where we have seen some progress from the European side, things are not now moving further forward. After the launch of the Doha Round, we have really seen very little progress and, as you know, the cost of not changing the trade rules in favor of poor countries and poor people is extremely high. So we've got a very strong focus on trade around the Summit, and it builds up into the Hong Kong Ministerial Conference in December.
Obviously capital is a key factor of production in the sense that for poor people, it is a big constraint in pursuing their livelihoods, so we see microfinance as part of a broader livelihood approach. The issue really is that there are different models and there are lots of debates about what works and what doesn't. We think that in terms of empowering women, savings and credit programs at the micro-level, particularly self-help based ones, are extremely important. But the critical thing from our side is that we have always held that development strategy should be defined by each country nationally. We are very much against the idea of presenting people with templates of what they should do globally because we don't think there are any global solutions for how development is going to happen. In fact, that was the problem in the 90's with the so-called Washington consensus: the World Bank and the IMF were pushing their version of what is right and what is wrong. The Campaign's position is that strategies should be nationally defined, but not just by governments - by governments in conjunction with their people. If local actors think microfinance is part of what they want to do, that is perfectly ok, but even if it is something that we think is absolutely the best idea, we don't want to sit down and tell any country what to do. It's up to them. We think there is enough good practice across the world to show them microfinance is helpful. And I think most of these countries have enough internal expertise to make their own decisions.
If we are talking about economically isolated countries, which are the least developed countries, the poorest countries, then there are some stages countries have to go through, some investments they have to make in their people before they can become capable of competing equally in the global market. Those are essential and really what the MDGs are about. If you don't invest in basic health, education, water supply, natural resource protection, then you are jumping the gun. If we don't deal with the basics and then want to integrate into the global market, then it will be like going into a boxing match with Mike Tyson. People have to equip themselves with the basics first, so we would certainly recommend sequencing and getting the basics worked out first.
Yes, of course microfinancial services are crucial and important, but in terms of integrating into global markets, that is a phased process. The big problem we are having right now is that developing countries do not have the policy space and the basic sovereignty they require to sequence and pace the speed at which they integrate into the global markets. Because integration into the global markets has an upside and a downside, it has a huge adjustment cost. Amongst the trade demands we are making as part of the Campaign, we are saying this process of integration needs to be done very carefully, that countries should have the ability to sequence it and pace themselves and to protect their own economies, particularly at the infant stage. Recommendations have been made by many people. We have the Commission for Africa, the ILO World Commission on the Social Dimension of Globalization, etc. My view personally is that developing countries are not short of recommendations coming from outside - there are far too many people making them. The real challenge is how do we allow them to do their work when every aid agency and every mission has people telling them what to do. President Mkapa of Tanzania says their ministries are dealing with 600 missions every year coming from donors and people making recommendations, but they don't allow the Tanzanians to decide anything. We are saying, please, let developing countries make their own decisions, let them sequence how they want to go. The challenge really we are facing is that when we ask governments to do something, then the governments have to, in turn, consult their citizens - which they don't do often. They make decisions which are sometimes not in keeping with their citizen's aspirations. So, yes, basic financial services and the development of local financial markets are very important. I think everyone knows that. But countries need to be given the space to do that.
The fact of the matter is that most poor people, the people who are missing the MDGs, are not the ones who are inside the formal banking sector at all and that is really where microfinance becomes important - to deal with the informal sector. And in the case of the formal banking sector, the problem is reversed: there is too much regulation. However, as a Campaign, we are asking the national campaigns to determine their own priorities, and that is what they are doing. In sub-Saharan Africa, for example, HIV would be the top priority.
I was making reference to the way in which global financial flows are less regulated than they should be and we've seen the cost of this in East Asia's meltdown which happened ten years ago. And there is a lot of talk of increasing investments as a major source as an engine of growth, but we know that there is almost zero investment going to sub-Saharan African countries, outside of extractive industries in the commodities sector, so basically you have hot money going in and out doing things which are not very regulated. So, we do think that it is very important at the meta-level to sort that out as well. But in terms of poor people being included in the global economy, I personally don't think we've reached that point yet. I make the distinction between poor people and poor countries. If you are talking about poor people, the elite in poor countries are already part of the global economy. In my country, India, maybe between 5-10% of the population is part of the global economy - but these are not the people missing the MDGs. The people we are concerned about, who are going to miss the MDGs, are not even a part of the national economy, forget the global economy. They are only part of a local economy.
What I would like to add is that the eight goals are truly interlinked, but for the achievement of Goal 1 in particular, the eradication of extreme poverty, I think it will be important for those working in microfinance to really engage with the MDGs. We now have national campaigns in most countries, certainly in most of the poor countries, so it is really crucial that microfinance actors start engaging with the national campaigns and become part of that. I think the microfinance industry should look at how it can start engaging, and how it would like to become involved in the global fight against poverty. Because we don't think the microfinance movement can be seen in isolation of the movement against poverty. It is ultimately a poverty fighting tool.
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