SECOND COMMITTEE PANEL DISCUSSION HEARS EXPERTS UNDERLINE IMPORTANT ROLE OF MICROCREDIT IN RAISING HOUSING INCOMES, BOOSTING LIVING STANDARDS

Fifty-eighth General Assembly

Second Committee

Panel Discussion on “Microcredit, Poverty

 Eradication and the Empowerment of Women”

SECOND COMMITTEE PANEL DISCUSSION HEARS EXPERTS UNDERLINE IMPORTANT ROLE

OF MICROCREDIT IN RAISING HOUSING INCOMES, BOOSTING LIVING STANDARDS

The provision of seed capital as small loans to poor entrepreneurs would create jobs, raise household incomes and improve living standards, especially for women, the Executive Director of the Foundation for International Community Assistance (FINCA) told the Second Committee (Economic and Financial) this afternoon.

Speaking during a panel discussion on “Microcredit, poverty eradication and the empowerment of women”, Rupert Scofield said microfinance was vital in alleviating poverty, especially in countries where less than 20 per cent of the people had access to credit.  Stressing the importance of trusting the poor, he said loans built self-esteem and a sense of responsibility as well as encouraging self-sufficiency through savings.

Through its 16,994 village banks in 22 countries, FINCA had offered 16-week loans of $50 to $500 to groups of low-income women, with collective guarantees and self-management, he said.  Using the money to start small businesses, improve family nutrition, send children to school and purchase goods and services, women throughout Africa, Central Asia, Eastern Europe and Latin America were helping to create jobs, inject cash into the economy and create a more educated labour force.

Another speaker, El Salvador’s Foreign Minister, emphasized that microcredit was vital in overcoming the feminization of poverty.  Maria Eugenia Brizuela de Avila said that some 30 per cent of microcredit in her country went to companies owned by women.  Microcredit led to increased incomes and self-esteem for women, as well as better food, education and housing for their children.  Governments must commit themselves to microcredit policies and supplement them with training, technical assistance and favourable environments for women.

Normand Lauzon, Executive Secretary of the United Nations Capital Development Fund (UNCDF), said that research in Indonesia by CGAP -– the consortium of donors of which the UNCDF was a member -- had shown microcredit borrowers to raise their incomes by 12.9 per cent, compared to control-group increases of 3 per cent.  In another study, by Freedom from Hunger, Ghanians had upped their incomes by $36, compared to $18 for non-clients.  An amazing World Bank study in Bangladesh had found that a 10 per cent increase in credit to women was linked to a 6.3 per cent increase in the mid-arm circumference of their daughters.

According to Anwarul Chowdhury, Under-Secretary-General and High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, microcredit programmes in Kosovo, Timor-Leste, and Afghanistan had helped build up self-employed businesses, boost girls’ education and empower women.  Some 600 parliamentarians worldwide had sent letters to the World Bank, African Development Bank, Asian Development Bank and the United Nations Development Programme (UNDP) urging them to double their contributions to microcredit programmes, which would pump another $500 million into microcredit programmes every year.

Rene Azokli, Managing Director of PADME, a leading microcredit institution in Benin, noted that microcredit provided financial services to people excluded from the traditional financial sector.  He described three categories of poor -- potential entrepreneurs with no capital, potential wage-earners with no jobs, and the ill or handicapped.  When microcredit was offered to the potential entrepreneurs, they created income-producing enterprises, provided employment for the wage-earners, and helped the handicapped.

During the ensuing discussion, which was chaired by Second Committee Chairman Iftekhar Chowdhury (Bangladesh), several representatives asked about the effect of microcredit on women’s empowerment and the role of the United Nations in promoting it.  Ms. Brizuela de Avila said many male heads of household in post-conflict El Salvador had migrated overseas in search of jobs, leaving their wives to run their homes and businesses.  With the heads of 30 per cent of Salvadorean households now women, microfinance had led to greater empowerment for women and brought the level of girls’ school enrolment up to that of boys.

Regarding the role of the United Nations, Under-Secretary-General Chowdhury said the Organization was promoting it, but must factor the contribution of microcredit to poverty alleviation and sustainable development into millennium development strategies.

Questioned about the reach of FINCA and the obstacles it faced in expanding to other areas, Mr. Scofield said the foundation had started in Latin America, where it already had a consulting business.  As it became better known, FINCA was invited by private-sector, government and civil organizations to bring its microcredit schemes to new areas.  The biggest obstacle to such expansion was funding, he added, stressing that FINCA lacked the capital to expand current programmes and create new ones.  If multilateral development banks and the UNDP did in fact fulfill appeals for greater funding, FINCA and other microlenders could overcome that constraint and take strides to meet the United Nations goal of providing microcredit services to 100 million families by 2005.

As for FINCA’s criteria for loan approvals, he said the foundation needed a critical mass of poor potential beneficiaries of the programme, as well as a favourable or enabling regulatory framework for microfinance best practices.  That excluded countries where interest rates were fixed arbitrarily, otherwise programmes would not last longer than three or four years.

The Second Committee will meet again at 10 a.m. tomorrow, Friday 24 October, to conclude its discussion of macroeconomic policy questions.

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