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Valladolid, Spain (Nov. 17) – In the closing day of workshops and plenaries at the Global Microcredit Summit 2011, delegates and speakers discussed the growing need of financial services for the poor in developing as well as industrialized countries.
Plenary speakers discussed the challenges faced in trying to reach people living in remote areas, such as the growing need for the microfinance sector to support rural farmers and agriculture. In their paper titled “Using Microfinance Plus Agricultural Services to Improve Rural Livelihoods and Food Security,” Sir Fazle Hasan Abed, Dr. Mahabub Hossain, Susan Davis and Rod Dubitsky explained that “the bulk of the world’s poor live in rural areas where agriculture is a critical activity for food security and income. Investment in agricultural development and rural livelihoods is therefore critical in the effort to achieve” the United Nations’ Millennium Development Goals.
The authors of the paper explain that microfinance institutions (MFIs) “can play a critical role in agricultural development on two fronts: (1) bridging the funding gap by providing MFI loans to rural areas in general and farmers in particular, and (2) the network effect, in which MFIs can use their vast network as a trusted conduit to help deploy agricultural innovations to rural areas that most players would have a hard time reaching.”
"Financial services are not enough," said Shameran Abed, BRAC’s Director of Microfinance Programs, who presented the paper. “MFIs should focus on providing microfinance-plus services.” He added that a focus on agriculture will help enhance food security, which will in turn decrease reliance on food aid and help the rural poor and poor women.
Plenary participants also addressed a way forward in microfinance that would address the “last-mile” problem, serving rural clients that the sector “is uniquely well positioned to solve.” Alex Counts, President and CEO of Grameen Foundation, and author of “Toward Reinventing Microfinance Through Solving the ‘Last-Mile Problem’: Bringing Clean Energy Solutions and Actionable Information to the Poor,” focused on energy poverty and the related issue of climate change, as well as the lack of access to critical information that could improve the lives of the poor. His paper included a special focus on how the microfinance sector could help address the global food crisis by providing just-in-time information on agricultural best practices to smallholder farmers.
Counts argues that “a vast and growing body of technological innovation and knowledge could and should be directly benefitting the world’s poor in their struggles to lead productive and healthy lives and ensure educational opportunities for the next generation. However, it is the exception rather than the rule that they benefit,” adding that “there is a need to go back to basics and reconnect with the philosophy of some of the earliest and most ethical practitioners, such as Professor Muhammad Yunus of the Grameen Bank and Ela Bhatt of SEWA.”
Commenting on the papers, Prakash Bakshi, Chairman, National Bank for Agriculture and Rural Development (NABARD) in India, said the approaches suggested were complementary: “If incomes improve, the quality of life and health improve, which in turn help improve income.” Claudio González Vega, Professor Emeritus, Ohio State University, added that microfinance “has a greater chance of improving lives if we recognize that that the poor have many faces. Each poor person expects and deserves solutions tailored to their circumstances and needs. Standardization is our greatest threat.”
Nicola Armacost, Managing Director and Co-Founder of ARC Finance, acknowledged that an issue like climate change “may not seem like something that should concern MFIs, but in fact it has a disproportionate effect on the poor.” Like González Vega, she believes the sector needs to offer “a suite of products, including targeted financing, savings and leasing products. We cannot be loan-centric in our approach.”
Energy lending, she said, “is fundamentally about improving the livelihoods and quality of life of poor people.” Once a poor person pays back a loan that enables them to convert to clean energy, it frees “income that would otherwise be spent on dirty fuel. In addition, because women and girls are usually responsible for collecting fuel, and spend more time indoors -- and thus suffer more from the effects of indoor air pollution -- clean energy benefits them directly.”
In his concluding remarks, Larry Reed, the incoming Director of the Microcredit Summit Campaign gave hope for the future on microfinance, saying “there are organizations that are reaching the most poor and helping to provide insurance and recovery help in areas such as Haiti and Pakistan.“ Reed continued by saying that “part of reaching the 100 million poorest goal involves these initiatives and learning from the organizations helping to bring the most poor out of poverty. The Seal of Excellence for Poverty Outreach and Transformation in Microfinance, which is slotted to begin a pilot project in the spring of 2012, is expected to help reach the goal of ensuring that 100 million of the world’s poorest microcredit clients move from living below $1.25 per day to living above it.”
About the Microcredit Summit Campaign
The Microcredit Summit Campaign is a project of RESULTS Educational Fund, a U.S.-based advocacy organization committed to creating the will to eliminate poverty. The Campaign was launched in 1997 and, in 2007, surpassed its original goal of reaching 100 million poorest families with credit for self-employment and other financial and business services. The Microcredit Summit Campaign aims to reach 175 million of the world’s poorest families by 2015 and ensure that 100 million of those families move above the World Bank’s $1.25-a-day poverty threshold.
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