MICROCAPITAL STORY: ‘Microfinance most Cost-effective, Efficient way of Reducing Poverty’, interview of Sam Daley-Harris, Microcredit Summit Campaign Founder

Sam Daley-Harris, Microcredit Summit Campaign founder is interviewed by the Economic Times of India about how useful microcredit is and his reaction to its criticisms. The full interview can be found here.

How successful has micro-finance been as an anti-poverty formula? 

In the 10 year period from 1997 to 2007 there has been huge growth in the number of MFIs (microfinance institutions) and the number of people reached, especially the poor. In 1997 an estimated 618 MFIs served 13.4 million people compared to 3,552 MFIs reaching 154 million people in 2007. The increase in the number of the poorest people receiving microcredit was 1300 percent, from 7.6 million in 1997 to 106 million in 2007.

Microfinance has obviously played an important role in reducing poverty, but not alone. MFIs which claim to have social progress as a stated objective should be able to track this goal in a cost-effective manner to ensure there is a sense of accountability and performance standards.

What matters more is how micro-finance impacts the lives of the poor? 

The number of clients reached is important, but poverty reduction matters more. 

What is your reaction to the criticism that micro-finance is a slow and inefficient way of poverty reduction?

Microfinance is the most cost effective way of reducing poverty. It is a better model when compared to other development projects including those run by governments. NGOs which offer MFI services can also provide add-on services such as health and education to enhance poverty alleviation. For example in Southern India the Microcredit Summit Campaign has integrated microfinance with health education with signs of early success for the 1600 clients. In Bangladesh women MFI clients have gained knowledge through their financial independence which has translated into a reduction in birth rates over the past 10-15 years. 

What has been the trend in the way resources are raised for micro-credit activity?

Self Help Groups (SHGs) now have a large role in providing microcredit as they are capable of raising loans and equity. In India in 2007, 50 million of the poorest accessed microcredit and of this 39 million received it from SHG savings. In comparison MFIs only reached 10 million, indicating that the role of banks has been undermined, much the same as with multilateral agencies such as USAID. The World Bank has been criticized for not providing more microfinance funds to families living on less than $1 a day. Grants are also becoming less important in this field.

Tell us about the Part II of Global Micro-Credit campaign.

In 2006, Part II of the Microcredit campaign was launched and the campaign was relaunched with a goal of ensuring that 175 million of the world’s poorest families, especially women, receive credit by 2015. The Microcredit campaign also aims to move 100 million of the world’s poorest from below $1 day to above $1 day (adjusted for purchasing power parity and for the period 1990 to 2015).  This would impact 875 million people assuming 5 people per family.

About the Microcredit Summit Campaign

The first Microcredit Summit was held in 1997 in Washington DC where over 2,900 people from 137 countries gathered to launch a nine year campaign to reach 100 million of the world’s poor by the 2005. The goal was nearly achieved and in 2006 Part II of the campaign was launched as discussed above. The Microcredit Summit Campaign is a project of the RESULTS Educational Fund; a US based non profit grassroots advocacy organization committed to ending hunger and poverty.

Each year the Microcredit Summit produces a report highlighting achievements and innovations for the prior year. Refer to the MicroCapital Paper Wrap-up for a summary of the State of the Microcredit Summit Campaign Report 2009, written by Sam Daley-Harris. The report discusses the human face of global poverty, reviews microfinance breakthroughs in helping slum dwellers move out of the slums and highlights innovations that have brought renewable energy to poor communities.

By Sally Levy, Research Assistant

Additional Resources:

Economic Times: Micro-finance most cost-effective, efficient way of reducing poverty

MicroCapital Paper Wrap-Up: ‘State of the Microcredit Summit Campaign Report 2009′, by Sam Daley-Harris, February 2, 2009.

The Microcredit Summit Campaign: Home

The Microcredit Summit Campaign: 2009 State of the Campaign Report

RESULTS: Home

 

 

 

 

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