Secretary-General, in message to Middle East/Africa summit meeting,

 

calls ‘microfinance movement’ success story of last decade

 

This is the text of a message from Secretary-General Kofi Annan to the Middle East and Africa Microcredit Summit Meeting taking place in Amman, Jordan, from 10 to 13 October, delivered by Mervat Tallawy, Executive Secretary, United Nations Economic and Social Commission for Western Asia (ESCAP):

The microfinance movement is one of the success stories of the past decade.  Over these 10 years or so, we have seen that, under the right conditions, access to financial services enables poor people to increase their incomes, build assets and reduce their vulnerability to crises.  Whether in Africa, the Middle East, Asia or Latin America, this has contributed to the empowerment of women and to better results in education, nutrition and health.

Yet only about 10 per cent of the world’s estimated 1 billion economically active poor have access to basic financial services.  In most developing countries, that is because poor clients are perceived as more risky and less profitable.  Since Governments and donors have only limited capacity to meet this supply shortfall, we need to involve microfinance institutions that can mobilize resources locally.  At the same time, we need to ensure that that such institutions apply sound business practices, maintain operational sustainability, adhere to good governance and clear and transparent reporting, and keep in sight the overall goal of serving low-income clients, including the poorest of the poor.

While microfinance in the Arab States region is expanding, key challenges remain.  These include the need for product diversification, capacity-building, donor dependency, and reform to promote the integration of the microfinance sector in the formal financial system.  In Africa, microfinance institutions are striving to increase outreach and sustainability, and have adopted microfinance approaches such as savings and credit unions, cooperatives and non-governmental organizations that provide credit.  But given their lack of access to resources and the absence of an enabling economic environment, many microfinance institutions remain dependent on external assistance.

The International Year of Microcredit, 2005, will be an opportunity to build greater awareness and understanding of the role microfinance can and should play in the eradication of poverty, its contribution to social development and its impact on the lives of people living in poverty.  The United Nations General Assembly has invited Member States to establish national coordinating committees or focal points to coordinate activities for the Year.  In this way Governments, in partnership with other stakeholders, can take an important step towards coordinating their activities nationally and regionally to create inclusive financial sectors for the poor.

I am sure that this gathering will make a valuable contribution to the preparations for the International Year.  In that spirit, I send my warmest greetings to all participants, and wish all of you a productive meeting.

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