VIABILITY OF MICRO-CREDIT PROGRAMMES IN CREATING EMPLOYMENT STRESSED BY BANGLADESH IN SOCIAL DEVELOPMENT COMMISSION

28 February 1997

Press Release
SOC/4420

VIABILITY OF MICRO-CREDIT PROGRAMMES IN CREATING EMPLOYMENT STRESSED BY BANGLADESH IN SOCIAL DEVELOPMENT COMMISSION

19970228 UNCTAD Says Slow Economic Growth, High Interest Rates, Loss of Labour Union Power, Technological Change among Main Reasons for High Unemployment

The experience of the Grameen Bank in Bangladesh had demonstrated the viability of micro-credit mechanisms in eradicating poverty and creating employment, that country's representative told the Commission for Social Development as it continued its deliberations this morning. The priority theme of the current session is "productive employment and sustainable livelihoods".

Micro-credit could play a key strategic role in achieving the common goals of the United Nations development conferences, he said. Grameen Bank families enjoyed higher rates of literacy, improved health conditions, smaller family sizes and overall better living conditions. Micro-credit programmes now in place in 50 countries were helping to create non-farm employment in rural areas, particularly for women. The recent Micro-credit Summit in Washington, D.C., had set out to ensure that 100 million of the world's poorest families, especially women, received credit by the year 2005.

A representative of the United Nations Conference on Trade and Development (UNCTAD) told the Commission that globalization had contributed only in a minor way to the high levels of unemployment and growing income disparities being experienced by a number of countries. The main reasons for that were slow economic growth and associated high real interest rates, loss of labour union power and technological change. He suggested appropriate macroeconomic polices among measures to deal with the problem of unemployment.

A "bottom-up" approach to economic development, in which local men and women exercised control over their employment and over their lives was essential, according to the representative of Sweden. Economic development and the stimulation of employment was not only a policy-planning exercise. It was also part of a political war between society's stakeholders.

Access to credit and training would raise productivity and income levels, the representative of India told the Commission. In his country, where 90 per cent of workers were employed in the informal sector,

Social Development Commission - 1a - Press Release SOC/4420 7th Meeting (AM) 28 February 1997

unemployment was relatively low. India's ninth five-year plan would give the highest priority to attaining full employment and eradicating poverty, he said.

Also speaking this morning were the representatives of Guatemala, Canada, Venezuela, Chile, South Africa, Romania, Spain and the Sudan. Representatives of the European Women's Lobby and the International Confederation of Free Trade Unions (ICFTU) also made statements.

When it meets again at 3 p.m. this afternoon, the Commission is scheduled to conclude the general discussion on the follow-up to the 1995 World Summit for Social Development.

Commission Work Programme

The Commission for Social Development met this morning to continue its consideration of the follow-up to the World Summit for Social Development. It was scheduled to continue consideration of its priority theme of productive employment and sustainable livelihoods.

Statements

LUIS FERNANDO CARRANZA CIFUENTES (Guatemala) said that his Government was attacking extreme poverty by decentralizing assistance programmes and developing others which created jobs. Productive employment was the best tool with which to eliminate poverty. State reform and public sector restructuring was an important part of the decentralization process. Guatemala was also promoting domestic private savings through institutionalizing capital markets.

His Government still faced many problems in implementing the commitments of the Copenhagen World Summit for Social Development, he said. Archaic social structures were still in place, but the Government was committed to eliminating discrimination as regards the country's Mayan population. Guatemala had a low tax base, an obsolete system for tax collection and a weak sense of social solidarity on the part of the highest taxpayers.

ROLANDO BAHAMONDES (Canada) said that employment creation in a country like Canada, which had high rates of unemployment, was a central policy concern for the Government. Believing that a healthy fiscal environment was the best way to foster employment, Canada was adhering to a deficit reduction plan supported by essential social programmes. Employment policy should play particular attention to groups with specific needs. People with disabilities needed equal citizenship. Canada strongly endorsed the United Nations Standard Rules on the Equalization of Opportunities for Persons with Disabilities.

Young people who faced the multiple barriers of minimal education, disabilities and single-parent family backgrounds, and young people in isolated areas and aboriginal communities were often at risk, he said. Canada was taking steps to help families caught in the "welfare trap" through a new family tax credit and higher child-care benefits. Those measures would be used to help low-income working families to cover the cost of child care and eliminate employment disincentives. Women, who too often found themselves as the heads of single-parent households, should benefit most from the new system.

ANWARUL KARIM CHOWDHURY (Bangladesh) said that informal businesses and micro-enterprises had demonstrated their viability in creating employment throughout Africa, Asia and Latin America. Earlier this month, the world's

Social Development Commission - 3 - Press Release SOC/4420 7th Meeting (AM) 28 February 1997

first Micro-credit Summit, attended by 2,500 registered participants from 112 countries, had taken place in Washington, D.C. The Summit sought to mobilize international support for micro-credit organizations and to launch a campaign to ensure that 100 million of the world's poorest families, especially women, received credit for self-employment and other business endeavours by the year 2005.

The micro-credit programmes now operating in 50 countries had been based largely on the experiences of the Grameen Bank in Bangladesh, which had helped thousands of asset-less poor women, he said. Contrary to traditional theory, the Grameen experience had demonstrated the viability of micro-credit mechanisms in eradicating poverty and creating employment. Grameen families had better literacy rates, improved health conditions, smaller family sizes, and overall better living conditions. Micro-credit could be a key strategy for achieving many of the common goals of the global development conferences. The experience of Bangladesh had demonstrated that micro-credit could create important alternative mechanisms for creating non-farm employment in rural areas, particularly for women. The Commission should support micro-credit in its recommendations.

S.R. HASHIM (India) described as "excellent and comprehensive" the report prepared by the International Labour Organization (ILO) secretariat that was before the Commission. The report could have benefited, however, from a better balance between the issues pertaining to expansion of work opportunities and those pertaining to quality of work/employment, and also from focusing on policies for expanding employment/work opportunities, particularly in the developing countries. While it was true that high levels of unemployment and underemployment caused, and had a close relationship with poverty, in a country such as India, where 90 per cent or more of the work force was engaged in the informal sector, the extent of unemployment or underemployment was relatively low. The major cause of poverty was one of low income and low productivity. That was important because of its implications for policy.

Faced with the vast numbers of the self-employed and in the informal sector, neither the concept of "job security" nor of "employability security" appeared to be applicable, he said. The only relevant concept for those involved was "livelihood security". He stressed that the challenge of eradicating poverty and unemployment in developing countries could only be met by expanding work opportunities while raising productivity and incomes. For that purpose, he suggested raising agricultural productivity in rural areas, and strengthening the informal sector through access to credit, training and, in urban areas, space for work.

He further suggested expanding employment and raising productivity and incomes by encouraging social mobilization processes. That, he explained,

Social Development Commission - 4 - Press Release SOC/4420 7th Meeting (AM) 28 February 1997

would include organizing people in small self-help groups and encouraging group activities with the involvement of non-governmental organizations and necessary support structures. India was about to embark on its ninth five- year plan, and it would give the highest priority to attaining full employment and eradicating poverty.

OSCAR R. DE ROJAS (Venezuela) said that part of his country's social solidarity plan was to ensure greater productivity and competitiveness at the same time. It would promote education and training by reforming the educational system to ensure the full, integral development of the individual. An important component of the strategy would be small- and medium-sized enterprises, social programmes and the training of the work force. The plan would also pay particular attention to young people and the most vulnerable, as well as to the management of programmes of productive employment. Venezuela attached great importance to the family, and the plan would seek to transmit the key principles of how to live with one another and how to work.

FIDEL COLOMA (Chile) said that there was no other way to fight poverty than full employment. He was pleased at the depth of the report before the Commission, and the faith of the ILO that with political will and commitment full employment was achievable. He further valued the fact that the report recognized that to achieve that objective, economic growth and the creation of an environment favourable to full employment were required.

For his country, work, economic growth and progress were inseparable, he said, noting that growth must be people-centred. Chile was now developing a major economic policy whose features would include labour relations based on consultation, and guaranteeing the implementation of labour relations agreements. The basic challenge was to reconcile the needs of economic growth with the needs of the individual.

GRAEME BLOCH (South Africa) said that his country had one of the most unequal societies on earth. A minority had a standard of living equal to that of Canada, while the majority had rates of infant mortality, illiteracy and disease equal to the worst in Africa. His Government believed that without addressing those inequalities, there would never be the stability and national will to generate economic growth. South Africa had embarked on a comprehensive development programme to provide safe drinking water, provide primary health care and school nutrition programmes, undertake new housing construction and to support micro-enterprises.

While South Africa had enjoyed economic growth, the national unemployment rate was between 25 and 30 per cent, he said. Only 5 per cent of secondary school graduates found employment. Those figures had been compounded by high rates of crime, domestic abuse, violence against women and widespread corruption. With the help of the United Nations Development

Social Development Commission - 5 - Press Release SOC/4420 7th Meeting (AM) 28 February 1997

Programme (UNDP), South Africa was addressing poverty and inequality by restructuring the labour market, ensuring employment equity, creating access for vulnerable groups and enhancing labour-intensive production methods.

BJORN JONZON (Sweden) said that while economic growth was essential to the creation of employment, economic growth rates told only part of the story. Patterns of growth were also critical. Efforts to reduce unemployment were not only a policy-planning exercise; they were also part of a political war among stakeholders. A bottom-up strategy, driven by local men and women and which de-emphasized central planning, was called for.

As formal employment diminished with economic restructuring in developing countries, the vitality of the informal sector had come to the fore, he said. Often, the informal sector was a "survival" sector, and was very diverse. People had to have room to make their own decisions; they needed to be able to control their employment and their lives.

VICTORIA SANDRU (Romania) said that Governments had the primary responsibility for elaborating and carrying out social policies, but those policies would not be successful without the participation of other national and international actors. The Romanian Government was implementing policies that emphasized economic growth and stimulated employment. Unemployment was a primary cost of the economic transformation process. The unemployment rate in Romania peaked at 11 per cent in 1994; it subsequently fell to 6.7 per cent.

Romania was attempting to target the stimulation of employment among disadvantaged groups by providing employers with incentives for hiring young, recently graduated workers, she said. Technical and financial assistance from the World Bank, the International Monetary Fund (IMF) and the European Union was facilitating economic restructuring, together with the creation of programmes for displaced workers. Romania was drafting legislation that would facilitate the use of foreign investment in accelerating privatization.

GEORG KELL, Officer-in-Charge, New York office of the United Nations Conference on Trade and Development (UNCTAD), emphasized that the global economy contributed only in a minor way to the high levels of unemployment and growing income disparities being experienced by a number of countries. In the industrialized countries, no one would deny that it was a key problem. Where it was less problematical, rising income differentials and a general deterioration of employment conditions were matters of concern. Trade-based competition, however, explained only a relatively small part of the unemployment and lower-wages dilemma. The main reasons were slow economic growth and associated high real interest rates, as well as the loss of labour union power. Technological change had also contributed to income disparities.

Social Development Commission - 6 - Press Release SOC/4420 7th Meeting (AM) 28 February 1997

He pointed out that the phenomenon of widening wage dispersals and income inequality had not been confined to the industrialized countries, as was evident in Latin America. By contrast, east and south-east Asia had continued to experience a decline in wage dispersion and poverty. Rather than creating excessive levels of unemployment, unequal wages and poverty, the trade and investment elements of globalization should be seen as offering hope to countries to develop further and reduce underemployment and poverty. He stressed that high and sustained rates of growth were at the heart of any viable solution for dealing with the twin problems of unemployment and poverty, for which appropriate macroeconomic polices were necessary.

HECTOR MARAVALL (Spain) said his country supported the statement that had been made by the Netherlands, on behalf of the European Union. Spain was developing its strategy for full employment, and fashioning new macroeconomic policies, because the subject was an urgent matter for the country on account of its high level of unemployment. The Government was trying to encourage dialogue in the labour market, and currently the trade unions and employers were involved in that process. Government was also encouraging training for the unemployed, as well as re-training for those in employment. Other efforts now being made included generating employment at the local level and using rural resources hitherto ignored.

Spain was also trying to shift from passively paying the unemployed, making people earn their own income, and encouraging small enterprises and self-employment, he said. There were also programmes for the handicapped, and Government was actively disseminating the Standard Rules. Some progress had also been made in helping the handicapped, with assistance from non- governmental organizations. In addition, work was also going on with experts of research institutions to formulate additional programmes for the handicapped. Concerning children, the Government was working on preventive programmes with the objective of helping children who needed help at an early age.

AHMED ABDEL HALIM (Sudan) said that the Commission appeared to be speaking with one voice regarding economic development and employment creation. All interventions in the Commission had made clear that enhanced international cooperation was needed for achieving social development goals. Many speakers had implied that trade liberalization was to be blamed for unemployment. If trade were truly free, there would be no problems and no unemployment; but partial liberalization left national industries unprotected.

The burden of external debt was a grave problem for developing economies, he said. International cooperation and assistance was critical to alleviating the pain of debt servicing. The Sudan had put forward a National Global Initiative for the 1990s that placed human beings at the centre of development concerns. That strategy included 56 different mechanisms for

Social Development Commission - 7 - Press Release SOC/4420 7th Meeting (AM) 28 February 1997

social development. The goal of the initiative was to satisfy human needs and to move authority from the State to civil society. It also sought to achieve popular participation in decision-making, justice and economic equality.

MARY COLLINS, a representative of the European Women's Lobby, said that the Commission would better reflect the goals of the Copenhagen Declaration if it were to achieve gender equality in the membership of its bureau and its work policy, decision-making and implementation strategies. If the bureau were to be composed of two representatives from each region, it could ensure an equal number of men and women. The Commission should ensure that all its data were gender disaggregated and should avoid "patricentric" assumptions.

STEPHEN PURSEY, a representative of the International Confederation of Free Trade Unions (ICFTU), said that the Commission should endorse the "Conclusions on Employment Policies in a Global Context" adopted by the eighty-third session of the International Labour Conference. That meeting affirmed that maintaining low inflation and financial stability was compatible with much higher levels of employment and that an integrated approach to the stimulation of productive employment was essential to the realization of the benefits of trade and investment liberalization. He recommended that the Commission examine reforms to the international exchange rate regime with a view to reducing the volatility of fluctuations caused by speculation, including the taxation of foreign exchange transactions. It should also review tax and expenditure policies from the perspective of reducing disincentives and increasing incentive to employment growth and poverty reduction, including measures to reduce tax avoidance.

* *** *