PRESS BRIEFING ON MICROCREDIT SUMMIT MEETING OF COUNCILS

Press Briefing

PRESS BRIEFING ON MICROCREDIT SUMMIT MEETING OF COUNCILS

Microfinance enabled the poor to change their circumstances; it was a tool for transformation, correspondents were told at a press briefing this morning with five speakers representing United Nations bodies, the private sector and non-governmental organizations. Officials from the United Nations Development Programme (UNDP), United Nations Development Fund for Women (UNIFEM), Microcredit Summit Campaign, Grameen Bank and Citicorp Foundation addressed correspondents about the upcoming Microcredit Summit Meeting of Councils, to be held from 25 to 27 June in New York, at which more than 1,200 people from over 80 countries would gather to discuss follow-up to the 1997 Microcredit Summit.

Henry Jackelen, Director, of the UNDP Private Sector Development Programme, said UNDP was proud to have been the single largest sponsor of the Summit, which had been organized by the microfinance community. It had given more support for participants' travel than all other donors combined. Further, UNDP had announced a major new initiative, "the microstart programme", which was conceived at the Summit and would be operational in 15 countries in July.

Sam Daley-Harris, Director, Microcredit Summit Campaign, expressed appreciation to Ambassador Anwarul Karim Chowdhury, Bangladesh's Permanent Representative to the United Nations, who was also chairman of the "Friends of Microcredit" group at the United Nations. That group had raised levels of commitment and awareness to microcredit within the United Nations community. He also thanked UNDP and UNIFEM for their assistance.

World poverty was scandalous, yet it got very little attention, he said. Microcredit, while not a panacea, offered a "hand up" to those who needed one. It was one year and four months after the Microcredit Summit had launched a nine-year campaign to reach 100 million of the world's poorest families, particularly women, with credit for self-employment and other financial services by the year 2005.

The Summit's focus was to reach the poorest of the poor -- the bottom half of those living below the poverty line -- especially women, through sustainable institutions that had a positive and measurable impact on the lives of clients and their families, he explained. The greatest challenges had to do with reaching the poorest people and measuring programme impact. To address the need for reliable indicators to determine who were the poorest of the poor, a Microcredit Summit poverty measurement discussion group had been created. Ideas were being discussed. For example, in rural areas, roofing materials could be used as an indicator of a family's level of poverty.

The Director of UNIFEM, Noeleen Heyzer, who is Co-Chair of the United Nations Council of Agencies to implement the Summit's goals, said that for

women, microfinance was a tool for transformation. Of the 1.3 billion people living on less than $1 a day, 70 per cent were women. The microcredit movement was a movement for change grounded in the realities of women's lives.

Microfinance was an important aspect of poverty eradication, a goal to which the United Nations system was fully committed, she said. The United Nations Council had met thrice to come up with action plans to bring about the goal of the Microcredit Summit. For the United Nations system, synergistic partnership with civil society and community leaders was important. The United Nations efforts included the creation of a network of microfinance practitioners, to ensure that sustainable institutions existed to deliver microcredit. Also, the Organization was helping to foster an enabling environment in which microenterprises could emerge. Another focus was empowerment, needed to address issues such as police harassment.

Microcredit was part of an integrated approach that also included good policies and committed leaders, she said. Its ultimate goals were not just increased income, but also improved lives for children and increasing women's capacity to participate in leadership and change. Closer partnership with the private sector was needed. Also, governments should incorporate some of the lessons emerging from the microcredit movement into national development strategies.

The founder and Managing Director of the Grameen Bank, Muhammad Yunus, thanked Ambassador Chowdhury for facilitating the press conference. Almost one-and-a-half years ago, the Microcredit Summit had been held in Washington, D.C., he recalled. The practice of microlending had been tested already, the question now was how to make it more widely available. At the Microcredit Summit held in Washington, D.C., one-and-a-half years ago, a goal had been set: to reach 100 million poorest families with microcredit by the year 2005. Commitments had been made, and now the real work had to be done. The upcoming Meeting of Councils would focus on action plans, rather than speech-making.

Since the Summit, concerns had increased about the future stability of emerging economies, he said. National economies could grow rapidly but that did not mean that the lives of all people were improving. When the majority of people were ignored while high growth rates were achieved, economic vulnerability continued. Economic growth should be anchored in the lives of millions of families; rather than focusing on the top echelons. States should put local currency into microcredit funds so that real people benefitted. Microcredit programmes did not need foreign currency loans; they were local currency activities.

Private sector involvement had increased as a result of the Summit, he said. The Grameen Bank was now working closely with Citicorp Bank, Levi Strauss and Telenor, a Norwegian telephone company that operated in 15 European countries. Grameen Phone, a cellular telephone company in

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Bangladesh, was created jointly with Telenor to bring cellular phones to poor women in villages. Grameen borrowers sold cellular phone services in the villages. Other private sector collaborations were in the works, and would include Internet access and environmentally friendly technology. Microcredit was not a single-dimensional activity, he added.

Often, money put into microlending projects did not benefit the poor women for whom such projects were designed, he said. That was one issue to be addressed at the upcoming meeting. Another pertained to institutional structures. Funds should be available at the country level, rather than through global mechanisms. Microcredit practitioners could then access that national fund in a transparent way. The United Nations, international financial institutions and bilateral donors all played important roles in building national capacity.

The President of the Citicorp Foundation, Paul Ostergard, said Citibank had long been intrigued by microlending. Citibank had offices in hundreds of countries, yet huge sectors of the population were "underbanked". What began for Citibank as a philanthropic relationship -- adding to the capital bases of microlenders around the world -- had since become a more business-like relationship. Skills that Citibank used daily in business dealings, ranging from credit analysis to risk assessments, could be of use to microlenders. Citibank urged its staff to get involved with the microlending community. Healthy businesses and healthy communities went hand in hand.

Citibank wanted to reach a billion customers by the year 2010, he said. That meant that it needed to get to know those people who, through loans, had put themselves on the "social escalator" and were moving towards becoming commercial bank customers. Microcredit programmes provided opportunities to grow closer to a part of the banking community. Citibank had been pleased to fund the Summit, and was urging other companies to get involved in the movement.

A correspondent asked why macroeconomic indices did not reflect advances resulting from microcredit lending. Mr. Yunus said that when improvements in the lives of millions of people were not reflected in macroeconomic indicators, the measurement systems by which economic situations were assessed had to be re-evaluated. Studies were being undertaken to better understand the links between a country's macroeconomic situation and its microcredit activities. Over time, methodologies would be improved to make measurement more sensitive. Ms. Heyzer added that macroeconomic figures and data did not reflect invisible work, which were undervalued and unrecognized by the macroeconomic system.

Asked about loans to women in the United States, Mr. Yunus said that the average size of those loans was under $1,500, which was a reasonable figure in that country. In Bangladesh, the average loan was $180. Mr. Ostergard added

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that the costs of starting a legal business in the United States were higher than in other countries, because of the United States' regulatory structure.

A correspondent asked about microcredit failures in sub-Saharan Africa. Mr. Jackelen said microcredit in that region was not as developed as in Latin America or Asia, primarily due to logistical issues. However, decentralized credit unions seemed to be yielding promising results. There had been failures in the past, often due to the fact that not all microcredit organizations adhered to the principles delineated at the Summit. Mr. Daley- Harris drew attention to successful programmes in Mali and Togo, and said institutional profiles would be available for about 600 microcredit programmes around the world. Ms. Heyzer said it was important to learn from past failures and successes.

Asked about the impact of the Asian crisis on microcredit, Mr. Yunus said that the real burden of the crisis was being borne by the poor. "The guy with a dozen Mercedes was probably still left with two", while the person who had lost his job or business had nothing left, he said. Yet "when the bailout process started, it focused on the guy with two Mercedes". An institutional framework could be developed to enable the poor to continue to work. The chances of another such crisis could be reduced if the socio-economic base was strengthened. Ms. Heyzer stressed the importance of building local capacity and domestic markets.

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