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MICROCREDIT - SMALL LOANS-BIG DREAMS
Dr. Susan Bliss Director Global Education NSW
Refereed:
Social Educators’ Association of Australia for The Social Educator 2005, 23(1). pp. 9-28.
ISSN 1328-3480.
Geography Teachers’ Association of New South Wales for Geography Bulletin, 2005, 37(1),
pp. 15-35. ISSN 0156-9236.
Australian Agency for International Development/AusAID for CD Rom, Microfinance: A
Global Education Resource. International Year of Microcredit 2005. Adelaide: Global
Education Centre (SA) for AusAID. ISBN 1 920861 34 3.
Presented:
United Nations, Sydney March 3 2005; Economics Business Educators’ Conference August 9
2005
Introduction
‘If we are looking for one single action which will enable the poor to overcome their poverty, I would
focus on credit’.
Grameen Bank's founder, Dr. Muhammad Yunus.
The modern microcredit movement based on the centuries-old system of „trust-based‟ lending supports
and promotes microenterprises that generate productive self-employment and income, helping poor,
marginalised people living below a $1 a day, move out of the vicious cycle of poverty, particularly in
developing countries in Asia, Africa, Latin America. This powerful anti-poverty tool, especially in the
hands of poor women, has demonstrated poor people‟s creative potential to improve their quality of life
when the right opportunity exists and allow them to reap the benefits of their skills and hard work, with
dignity.
Microcredit gives poor people access to credit from a diversity of microfinancial institutions (MFIs)
they need to exploit income-earning opportunities, meet life-cycle basic needs, cope with emergencies
such as natural disasters and protect them from further impoverishment during economic stress
(Rutherford, 2001). Microfinance and/or microcredit is not the panacea for the elimination of global
poverty as not all poor households possess an able bodied member to be engaged in income-generating
activities, have entrepreneurial abilities or the self discipline to make effective use of microcredit
(Gibbons, 2002).
Photo 1. Micocredit project in
Vietnam. Woman making rice
paper (S.Bliss).
2
When did it begin?
Bangladesh, the home of „modern‟ microcredit institutions, started in 1976, when Muhammad Yunus,
an economics professor, gave a $27 loan to a small group of village women, without demanding
collateral. The women defied expectations by not only repaying the loan but developing a sustainable
business and starting savings accounts (Loth, 2002). Today this simple economic „Grameen Bank
microcredit model‟ has expanded globally to involve millions of borrowers and savers with the
potential to improve the quality of life of the poorest people. This praiseworthy innovation was later
endorsed by the official development community and in June 1995 the World Bank launched a Micro-
Finance Programme under the Consultative Group to Assist the Poorest (CGAP) to promote and fund
similar Non Government Organisation (NGO)-style microcredit programmes. The overall aim was to
use microcredit to raise productivity and income of the poor on a sustainable basis. Other interested
parties, such as microcredit practitioners from both developing and industrialised countries, founders of
the Grameen Bank, Bangladesh and the Self Employed Women's Association (SEWA), India, the
president of Citibank International and a vice president of the World Bank organised the inaugural
global Microcredit Summit in Washington, February 1997. The aim of the summit was to promote
microcredit on a larger scale to new audiences and to raise $21.6 billion by 2005 for a microcredit „plan
of action‟ that seeks to provide credit for self employment to 100 million of the world's poorest
families, particularly women.
As a response to increasing global demand to eradicate global poverty the United Nations General
Assembly designated 2005 as the International Year of Microcredit and invited governments, United
Nations agencies, NGOs, international organisations and the private sector to build the capacity of the
microfinancial sector. In declaring 2005 the International Year of Microcredit there is a global
opportunity to raise awareness of the importance of microcredit and microfinance in the eradication of
poverty, share good practices and further enhance programmes that support sustainable pro-poor
financial sectors around the world. Expanding microfinance to the „poorest of the poor‟ can contribute
to achieving the United Nations Millennium
Development Goals (MDG), particularly
relating to halving the proportion of the
people living in extreme poverty by 2015,
promoting gender equality and empowerment
of women.
Photo 2: Woman knitting and selling llama
clothes in Peru with a microloan (S. Bliss)
What is microcredit and microfinance?
Microcredit is the name given to small loans
made to poor people who are regarded as bad
financial risks, by conventional banks, as they
have insufficient savings or assets to obtain a
loan. Over time this word has created
misunderstanding and confusion among
development practitioners, as a variety of
other terms are commonly used in different
countries, such as „informal credit‟ and
barefoot banks‟ by analogy to the Chinese
„barefoot doctors‟. Recently the term has been
joined by others beginning in „micro‟, that
relate to aspects of the process, such as
microbusiness, microenterprise, microfinance,
microlender and microbank. Despite the
diversity of definitions the word microcredit
generally means:
small size loans
shorter repayment periods
flexible and easy to understand
regulations on loans
small scale activities based on local conditions and needs
3
clients are small entrepreneurs and low-income households
loans used to generate income, develop enterprises and used by the community for social
services such as health and education
The Virtual Library on Microcredit takes the definition of microcredit beyond the confines of 'money'
and declares in its conceptual framework that it is also about „information‟ that is timely and
appropriate in the form of strategies, tools, grassroots organisations and the education of the population
on development issues related to microcredit.
As an outcome of the confusing terminology it was proposed by some countries and some United
Nations agencies that the terms „microcredit‟ and „microfinance‟ be used interchangeably. However
„microcredit‟ and „microfinance‟ are not identical concepts as microfinance includes access to a range
of financial services and products, including credit, savings, money transfers, insurance and asset-
building mechanisms required by the unique and widely varying needs of poor people to enhance their
ability to increase incomes and mitigate vulnerability in times of economic stress.
Robinson (2001) in the Microfinance Revolution excludes the „poorest of the poor‟ from the definition
of microfinance because for a variety of reasons they are unable to engage in economic activity and
cannot be the responsibility of the financial sector. Instead she states that they need access to a „tool
box‟ of subsidised poverty alleviation instruments. The exclusion of the „poorest of the poor‟ sets up a
dichotomy between „financial systems‟ and „poverty lending approaches.‟ The former is based on
sustainable institutions, for example the Indonesian rural financial institutions and the later on
subsidised institutions, for example the Grameen Bank.
Microcredit businesses are often plagued by the problems of small size and isolation and rely on local
patronage, which may not be sufficient to support long term growth. These problems may be solved by
„microenterprise clusters‟ or groups of microenterprises located in close proximity and engaging in
similar business activities. The main advantages are collective efficiency as well as sharing labour,
information and technological innovations. On the other hand some clusters are unable to progress
beyond the rudimentary stage and develop a parochial world view (Weijland, 1999).
Photo 3: Man selling hand
made copper pots in Tunisia
with a microloan (S.Bliss)
Growth and increasing
demand
Since the 1970s there have been
a growing number of
community institutions and
organisations delivering
financial services to poor and
low-income people with the aim of reducing poverty for a more equal, socially just world. Known as
microcredit or the broader term microfinance, 30 million people now have access to microfinance
(Unitus). Over the last five years the number of poor clients has grown by 350 percent, from 7.6
million in 1997 to 26.8 million in 2001 and the number of very poor women with access to microcredit
increased from 10.3 million in 1999 to 21,169,754 in 2001 (Microcredit Summit Report, 2002).
Although microcredit and microfinance have had a positive impact on the quality of life of millions of
poor people, 400 to 500 million households still lack access to sustainable financial services, such as
savings, credit or insurance to enable them to start a small business. At present the need for credit
exceeds current capacity as the existing 10,000 Microfinancial Institutions (MFIs) reach only 4% of the
potential market (World Bank). For example in Africa, women account for 60 per cent of the rural
labour force, contribute 80 per cent to food production, yet receive only 10 per cent of credit provided
to farmers (Virtual Library on Microcredit).
4
The Grameen Bank (GB) in Bangladesh, the pioneer of „new‟ microcredit institutions, began as an
NGO but is now legally recognised as a new kind of bank. As of July, 2004, it has more than 24
organisations and 3.7 million borrowers, 96 percent of whom are women. With 1267 branches, GB
provides services in 46,000 villages, covering more than 68 percent of villages in Bangladesh (Table
1). The bank at first provides loans of $50 or less to small groups of up to five people who act as
guarantors for each other and make obligatory contributions to a group savings fund, part of which
serves as an insurance fund against default. Loans are small, but sufficient to finance microenterprises
such as rice-husking, machine repairing and the purchase of rickshaws, cows, goats, material and
pottery. The interest rate on loans is 16 percent, women make up more than 90 per cent of borrowers
and the repayment rate on loans is currently 95 per cent due to group pressure, self-interest and the
motivation of borrowers. A comparison of GB members with comparable non-GB members shows that
the former economically benefited from microfinancial services resulting in only 20 percent living
below the poverty line compared to 56 percent for the latter (http://www.grameen-
info.org/bank/cds.html).
Grameen promotes credit as a human right. It believes poverty is not created by the poor but created by
institutions and policies and that charity is not the long term solution to eradicating poverty. Grameen
credit is based on the premise that the poor have skills which remain unutilised or under-utilised and
that by unleashing the energy and creativity in each human being poverty can be eradicated. Grameen
is not based on collateral or legally enforceable contracts, but based on „trust‟. In order to obtain a loan
a borrower must join a group of borrowers and be part of a savings programme. Grameen provides
door-step service based on the principle that the bank should go to the people. All loans are paid in
instalments (weekly or bi-weekly) and new loans become available when the previous loan is repaid.
The Grameen Bank started as an innovative local initiative. Today a small bubble of hope has made an
impact on poverty alleviation at the national level (http://www.grameen-info.org/bank/cds.html).
Table 1: Growth of Grameen Bank 1997-2003
Source: http://www.grameen-info.org/bank/sevenyearGB.htm (adapted)
Mill
ion
Tan
k
Particulars 1997 1998 1999 2000 2001 2002 2003
Authorised Capital 500 500 500 500 500 500 500
Own Fund 1197 2348 2491 2530 2623 2800 9515
Deposits 4978 5222 5551 6115 7169 8952 13306
Other Sources of Fund 1297 658 792 399 208 143 109
Borrowings 11293 10836 11640 10629 9781 6978 4213
Assets 21369 21072 22647 21952 21864 20889 27144
Expenses 2807 2917 3080 2997 3108 2980 3220
Net Profit 15 103 77 11 59 60 357
Provision Balance 2304 2987 3389 3789 3601 3729 3547
Bad Debt 19 64 227 224 906 545 778
Bad Debt Recovery 6 7 6 11 47 105 133
Accumulated Disbursement 88021 108114 124035 138069 154105 169974 191440
Number of Employees 12628 12850 12427 11028 11841 11709 11855
Number of Members 2272503 2368347 2357083 2378356 2378601 2483006 3123802
Number of Centres 64701 66712 67691 68467 68591 70928 74703
Number of Villages 37937 39045 39706 40225 40447 41636 43681
Number of Branches 1105 1137 1149 1160 1173 1178 1195
5
Photo 4: Grameen Bank
loan to sell material
Sources of finance for the poor
Although the Grameen microcredit model burst incandescently into developing countries (1970s) and
developed countries (1980s) lending to poor households and savings by poor people is not a new or
solely donor-driven phenomenon. Many poor communities, with or without outside assistance, have
run small savings and loans schemes, such as revolving savings and credit associations (ROSCAs).
Traditional loans and savings schemes have included loans of livestock among nomadic herders in
Sub-Saharan Africa, the accumulation of savings through dowries in India and credit through a village
money lender. In the 1980s the Chinese government had 'poverty lending' programmes, directed to
small enterprises and poor individuals with a view to creating jobs. Interest on loans was low but
repayment rates were poor, averaging 40% as most of the rural microcredit programmes did not suit the
people‟s needs as they could not make repayments until the end of the agricultural harvest (Unger,
2002). By 1991 most poverty lending had ceased and externally funded microcredit, such as the
Grameen Bank model, began to fill the gaps left by the government. Today microcredit facilities have
expanded with government or NGO support.
There are several sources of capital that poor people can access to fund a microenterprise whether from
formal or informal sources or from older smaller NGO schemes (microcredit) or the newer larger
lending institutions (microfinance) that encourages savings as well as provides credit and insurance,
such as:
Self financing is difficult as poor people living a subsistence lifestyle are unable to save
Moneylenders/pawn shops generally will not lend to the „poorest of the poor‟ and their
prohibitively high interest rates makes them an undesirable source of credit for poor people
Commercial banks and other lending institutions generally do not lend to poor people as they
lack collateral and consider their businesses as a high failure risk
Grant based microfinance is provided by venture capitalists to start a project. For example the
Trickle Up Program operates globally and has successfully used grants to help finance
thousands of small businesses and provide employment in poor rural settlements. The problem
arises as to whether the grant is sustainable but many microenterprises, financed by grants
from the American Village Enterprise Fund, have remained in business for over four years
6
Microcredit institutions give loans to clients rejected by commercial banks. Most still do not
cater for the „poorest of the poor‟ in rural areas given their need for sustainable finance and
that the bulk of their business is located in urban areas. These lending sources can be either
informal (moneylenders, pawn shops, loans from friends and relatives, consumer credit);
informal groups (tontin, su su, ROSCA); activity-based through conventional or specialised
banks (agricultural credit, fisheries credit, handloom credit); cooperatives (credit union,
savings and loan associations, savings banks); Bank/NGO partnership; Grameen type and
other models used by NGOs and non-NGOs (no collateral). Muhammad Yunus (2003)
proposed that because of the diversity of microfinancial institutions that they should be
classified to enable administrators to formulate the right policies and design appropriate
institutions and methodologies
Photo 5: Woman making headbands in Cuzco, Peru as a
microcredit project (S.Bliss)
Money shops versus conventional banks
Poor people have usually been viewed by the conventional
banking system as „unbankable‟ because they offer no
security on a loan. They are also a bad risk with regard to
repayment and also the size of loans too small for a bank to
handle profitably. Over the last decade, due to the efforts of
NGOs and other microorganisations in developing
countries, all these objections have been disproved as the
poor, especially women, can successfully use small loans to
earn an income, are prompt and reliable repayers and
lending to the poor can be financially sustainable, as it not
only covers costs but makes a profit.
In urban areas in the Philippines some banks have moved
beyond their formal services through „moneyshops‟. For
example the Philippine Commercial and Industrial Bank
(PCIB) have introduced a „building bridges mechanism‟ to
reduce poverty by giving poor people greater access to
credit. Since its inception in 1973 „moneyshops‟ have become the major activity of the PCIB.
Table2: Moneyshop versus commercial banks
Type of institute Moneyshop Formal banking
Customer Offers working capital to poor
market vendors
Offers loans to people with savings
and assets
Building Market stalls in public markets with
basic infrastructure
Large expensive buildings-often
high rise
Amount of loan Originally small
Averaging less than $50
Large
$100 to millions of dollars
Procedures Simple – good for people with little
or no education
More complex-requires an education
to read and understand the fine print-
rules and complex regulations
Financial risk Poor as no assets or income Good as backed by assets and
regular income
Collateral Traditional collateral is often
replaced by collective guarantee
groups whose members are mutually
responsible for seeing that loans are
repaid.
Collateral-use savings or sell assets
to pay loans
Responsibility to pay Collective-group/community Individual
Access Easier access for poor people. Still
limited access for „poorest of the
poor‟ and people living in remote,
isolated rural areas
Difficult access for poor people as
they work during the formal banking
business hours
Business times Operations adjusted to business Fixed times of opening and closing.
7
patterns in the market place. Open in
early hours of the morning when
market starts
Generally in line with business times
(eg. 10am -5pm)
Payment place Lenders go to the borrower‟s home
or place of work for repayments and
savings
Borrowers visit the bank to borrow,
save and repay loans
Charges Charge 3% per month (above the
bank rate). This is lower than money
lenders who charge several hundred
percent a month under the ‘five-six’
scheme’*
Charge less than 3% per month
Frequency of collection Daily collection Monthly collection
Repayment rates High repayment rates allows capital
to be recycled into new loans
Lower repayment rates means
slower circulation of money
Percentage to cover bad
debts/litigation
Higher percentage of loans made
available to cover anticipated bad
debts
Lower percentage of loans made
available to cover bad debts as most
lenders have assets that can be sold
if they are unable to pay the debt
Administrative expenses Low Higher-more skilled administrators
and advanced, expensive technology
Attracting loans Not as successful at attracting loans
as credit unions
Generally as successful at attracting
loans as credit unions
Savings Borrowers must be savers Not essential
What is savings spent on? Borrowers now have the capacity to
improve their quality of life and the
futures of their children. Extra money
earned is used to obtain basic needs
such as better food, housing and
education
Extra money spent on more
expensive homes and cars, private
schooling for children, travel and
higher threshold goods, such as
whitegoods
Impacts Positive impact on specific
socioeconomic variables such as
children‟s schooling, household
nutrition and empowerment of
women.
Higher quality of life and purchase
more expensive goods and services
New enterprises Create a new pot of money to support
development projects such as
microcredit/AIDS programs and
microcredit/education/health
programs.
Banks support community
organisations, sporting activities,
cultural events
Domestic savings Growing source of savings
diminishing the need for donor funds
Savings a major source for loans
*‘Five-six’ lending scheme
The „five-six‟ lending scheme charges 20 percent interest for 20, 30 or 40 days. 40 days is the regular
duration of the loan that translates into 182.5 percent per annum.
If you borrow 500 pesos you would pay 600 pesos after 40 days. If you are not able to pay anything for
a year, you would pay 1,412.50 pesos at the end of the year. If you compound the interest every 40
days that you are not able to pay, at year's end you owe the usurer 2,579.88 pesos. This means a
whopping 416 percent interest on your 500-peso loan.
(http://www.inq7.net/opi/2003/jun/26/opi_mpdoyo-1.htm)
8
Photo 6: Beauty parlour
business in the Smokey
Mountain garbage tip in
Manila, the Philippines
(S.Bliss)
Sustainable
microfinancial
institutions and programmes
Sustainable microfinancial organisations whether self managed cooperatives, professionally managed
microfinancial institutions (MFIs) or formal financial institutions need to provide long term, high
quality microfinance to the poor if poverty is to be reduced in the long run. This means microfinance
must be accessible, responsive to the poor‟s diverse financial needs and sustainable as rarely one or two
small doses of credit makes a substantial difference to their lives. At the same time microorganisations
must become financially self sufficient as permanency in the community is a powerful incentive for
repayment (Donaghue and Zotalis, 2002).
Today a diversity of microfinancial organisations has found ways to make lending to the poor
sustainable, for example:
The Australian Government through AusAID has microfinance integrated into its regular
overseas development programs. AusAID's microfinance expenditure is channelled through a
number of intermediaries including Australian commercial contractors and NGOs, both in
Australia and in developing countries. For example the Bougainville Microfinance Systems
(BMFS) funded by AusAID, encourages self reliance and financial independence.
Gredit and Savings for the Hardcore Poor in Asia (CASHPOOR), a network of twenty MFIs,
operates in eight Asian countries providing technical assistance, training and promoting new
MFIs in unserved regions.
The World Bank Consultative Group to Assist the Poorest (CGAP), a consortium of 29
bilateral and multilateral donor agencies, states it delivers flexible, high quality financial
services to the very poor on a sustainable basis. It serves the microfinance industry through
the delivery of training and action research on innovations.
ACCION International, a non profit organisation, advocates it fights poverty by bringing
financial services to street vendors and dressmakers. Its loans can make a difference between
mere survival and a decent life.
Opportunity International Australia for thirty years states it has distributed more than a million
small business loans in 23 countries. It advocates it provides business training, savings
schemes, leadership development and financial planning. Every day at least 1200 families
receive help enabling them to be better equipped to take control of their lives resulting in a
better quality of life for the next generation.
UN World Food Programme/International Fund for Agricultural Development in Guyuan
Prefecture, Ningxia, has a US$930,000 scheme that gives women with incomes below the
poverty line credit to invest in income generating activities. Loans to 25,000 women range
from $60 to $120 at an interest rate of 8.64% per year.
Mobile bankers in West Africa In large market places in West Africa, „mobile bankers‟ make
daily visits to market vendors to collect their savings, repay loans as well as extend their
credit. Their regular daily visits places pressure on vendors to make deposits thereby reducing
the risk of bad debts. For the poor market vendor, mobile bankers offer the convenience of
9
bringing banking services to their place of activity, during their working hours, and offering
cheaper credit than a formal bank. A survey of 44 market women in Abidjan showed that they
preferred mobile bankers over savings and credit associations because it was easier to
negotiate with one person and there was little risk in depositing money with someone who
visited daily.
Besides Microfinancial organisations there are also projects such as SafeSave, a bank that provides
credit in the slums of Dhaka offering convenient, flexible banking services and covering costs without
subsidies. The SafeSave staff visit their client each day at their own homes or workplaces and offer
them the opportunity to save and borrow. An NGO, Freedom from Hunger, has a Credit with Education
Program that combines the power of microcredit with women who have little education and live in
rural areas on less than a $1 a day. These women are particularly vulnerable to HIV/AIDs because they
lack empowerment to take action on choices concerning their health. This program has resulted in
improved health and nutrition for the borrower‟s children.
MFIs generally have one to five employees are unregistered and do not pay taxes. To be successful and
sustainable the entrepreneurs require capital, training and knowledge of markets, prices and the
technical ability to create the product and the skills as well as the knowledge to deliver the service.
They also need the ability to manage risks so they can minimise potential failures.
A number of MFIs have shown that, with strong management and efficient operations the United
Nations MDG target, to halve the number of people living in absolute poverty by 2015, may be
possible. The challenge is to build capacity in the financial sector drawing on lessons from
international best practices. For example in 2003 the Association for Social Advancement (ASA) in
Bangladesh had over 2.1 million clients and the Bangladesh Rural Advancement Committee (BRAC)
over 3.6 million. Acleda and EMT in Cambodia, had over 80,000 clients each and Compartamos, in
Mexico, the largest Latin American program had over 150,000 clients. Once these institutions become
a sustainable, permanent feature on the financial landscape, they can reduce their reliance on donor
funding.
The MFIs and other financial institutions (OFIs) providing microfinancial services have set in motion a
process of change from an activity that was subsidy dependent to one that is a viable business. It has
shattered the myth that poor households cannot and do not save, as well as discovered that the poor are
creditworthy and financial services can be provided to the poor on a profitable basis at low costs
without relying on collateral. It has also triggered a process toward broadening rural financial markets
and strengthening the human capital of the poor, particularly women, at the household, enterprise and
community level. Sustainable delivery of microfinancial services on a large scale in some countries has
generated positive developments in microfinancial policies and practices among all stakeholders, such
as governments, central banks, microfinance
service providers and external funding agencies
(ADB Microfinance Strategy).
Despite the global spread of microfinancial
institutions, there is little standardisation across
studies and accurate data comparing the success
of programs, as the definitions of „poverty‟,
„reduction in poverty‟ and „empowerment of
women‟ varies between studies and countries.
Most of the literature on microcredit is from
empirical observation and anecdotal evidence.
However, preliminary quantitative results shows
positive aspects of the microcredit movement
but critics are still concerned about microcredit
dependency and the durability of poverty
reduction
Photo 7: Woman making Batik for clothes in
Indonesia with a microloan (S.Bliss)
Perspectives on implementing microcredit
projects
10
An understanding of the heterogeneity of „the poor‟ (eg. low, middle or upper income poor, rural or
urban poor) is important when identifying the best appropriate sustainable programs and institutions in
poverty alleviation and income enhancement. Programs and MFIs may be judged successful if they
helped households climb above the poverty line and increased their incomes or whether the program
made a profit. Most programs tend to focus on the „ability to pay‟ and the need to be profitable. A
related consequence is that finance-remains focused on the middle and upper income poor leaving the
poorest of the poor yet to benefit from microfinancial programs in most countries. As more MFIs have
become financially self sufficient many have moved from a reliance on grants and soft loans for their
lending capital towards commercial loans. At the same time their incentive to lend to desperately poor
borrowers evaporates (Mayoux, 1997) as small loans are not cost effective and greater demands on
microcredit training programs increases lending costs.
A major problem of some microcredit
programs is that they are raising some
people out of poverty, keeping some people
from further poverty but are not reaching
the people who need the most assistance. In
fact, some programs may even increase the
chasm between the poorest and the rest of
society as often the poorest of the poor do
not benefit from credit programs but from
subsidised wage and infrastructure
improvement programs. In contrast
microcredit programs have shown that the
moderately poor are capable of helping
themselves out of poverty given the infusion
of small amounts of capital (Meade, 2001).
Photo 8: Man making pottery in Morocco
with a microloan (S.Bliss)
Table 3: Perspectives - criteria for a loan
Who are poor? bankable poor
middle and upper income poor
„poorest of the poor‟
living on less than a $1 a day
living on less than $2 day
poor women or poor men
rural poor versus urban poor
households without basic human rights eg. access to clean water
poor refugees
poor ethnic minorities
Training with or
without loans? provide credit and no training eg. new farming techniques
loans supported by training packages. How much should be spent
on training? What should be the length the training period?
Economic and/or
social objectives? credit not tied to social objectives as only aim is to generate
income and not improve the quality of life of the family or
community
credit tied to social improvements such as improvement in health
or education of children (multifaceted approach). Increased social
development of family and community
11
Subsidised or
unsubsidised loans? loans not subsidised. Who will bear the cost of administering the
loan?
loans subsidised. For how long? Sustainable?
Short or long term
length of credit? credit for a short period to help poor out of the cycle of poverty
credit always available to the poor for longer periods to safeguard
against economic fluctuations and natural disasters. Sustainable?
Impacts on reducing poverty
Over the past three decades sustainable access to microcredit and other financial services have been
important instruments for alleviating poverty making a positive impact on the quality of life of many
poor people as they have used small loans to start new enterprises and expand ongoing ones. They have
taken advantage of increased earnings to improve consumption levels, send their children to school and
build assets. They have accumulated savings to provide protection against illness and sudden disasters
as well as enabled more families‟ access to better health care. Women, the particular focus of many
microfinancial programs, have become empowered to participate in decisions and to make the choices
that best serve their needs.
Microfinance, like most development activities, works best when it is part of a broader multifaceted
approach to poverty alleviation in which a number of other structural impediments that face the poor,
such as poor health, illiteracy and inadequate infrastructure are also addressed. In practice microcredit
is often treated as a stand-alone activity (Kilby, 2002) but ideally poor people need access to a
coordinated combination of microfinancial services as well as other development services for improved
quality of life.
Studies in more than 24 developing countries found that microcredit increased incomes as it allowed
the borrower to increase the number of goods or services sold and reduce the costs of supplies and raw
materials. As a result, sales increased and profits grew 25% to 40% (Unitus). Another study in
Indonesia on the Bank Rakyat, found that borrowers average incomes increased by 112 percent and on
the island of Lombok, 90 percent of households had moved out of poverty (CGAP). Approximately 21
percent of the Grameen Bank borrowers and 11 percent of the borrowers of the Bangladesh Rural
Advancement Committee (BRAC), managed to lift their families out of poverty within four years.
Extreme poverty declined from 33 percent to 10 percent among Grameen Bank participants, and from
34 percent to 14 percent among BRAC participants. MkNelly and Dunford (1999) reported that the
income of 66 percent of clients in CRECER, in Bolivia, had increased 86 percent and the clients in a
Freedom from Hunger programme in Ghana, increased their incomes by $36 compared to $18 for non-
clients. Also extremely poor clients participating in the Zambuko Trust, in Zimbabwe, increased
consumption of high protein foods, such as meat, fish, chicken and milk (Barnes, 2001).
„A study of SHARE clients in India showed that 75 percent of clients who participated in the program
for longer periods saw significant improvements in their economic well-being (based on sources of
income, ownership of productive assets, housing conditions, and household dependency ratio) and that
half of the clients graduated out of poverty. There was a marked shift in employment patterns of
clients-from irregular, low-paid daily labour to diversified sources of earnings, increased employment
of family members, and a strong reliance on small business. Over half of the SHARE clients indicated
that they had used their microenterprise profits to pay for major social events rather than go into debt to
meet such obligations‟ (Simonwitz, 2002).
Building sustainable financial services systems for poor people is important for not only poverty
reduction and enterprise formation and growth but financial sector development as it enables people,
who have not been integrated into the formal financial sector, because of low incomes, gender,
ethnicity or remote location, to obtain loans. This represents a large, potentially profitable market for
MFIs.
12
Photo 9: Woman
selling wares outside
tourist hotel in Ho Chi
Minh City, Vietnam
with the aid of a
microloan (S.Bliss)
Diagram 1 Impacts of microfinance
IMPACTS
Reduced poverty
Provided basic
human rights eg.
access to adequate
shelter, clean water,
education and health
services
Increased agricultural
productivity and food
security
Increased incomes-
multiplier effect
increased GDP
Reduced conflict
Empowered women-
socially,
economically,
politically
Integrated with
development/social
projects eg.
Microcredit/HIV/AIDS
Increased gender
equity
Increased
employment-multiplier
effect on growth
Increased small
enterprises
Strengthened political, social and
economic development of the
poor
Increased microfinance
policies/practices among
all stakeholders:
governments, NGOs,
central banks,
microfinance services,
external funding
agencies
Increased
successful village-
level pro-capitalist
entrepreneurs
Increased
socially
responsible
capitalism
13
Table 4 Microfinance poverty reduction
Source: http://www.adb.org/Documents/Policies/Microfinance/microfinance0100.asp
Financial service Results Impact on poverty
Savings facilities of
microfinance
institutions (MFIs)
More financial savings
Income from savings
Greater capacity for self-investments
Capacity to invest in better technology
Enable consumption smoothening
Enhance ability to face external shocks
Reduce need to borrow from money
lenders at high interest rates
Enable purchase of productive assets
Reduce distress selling of assets
Improve allocation of resources
Increase economic growth
Reduce household vulnerability to
risks/external shocks
Less volatility in household consumption
Greater income
Severity of poverty is reduced
Empowerment
Reduce social exclusion
Credit facilities Enable taking advantage of profitable
investment opportunities
Lead to adoption of better technology
Enable expansion of microenterprises
Diversification of economic activities
Enable consumption smoothening
Promote risk taking
Reduce reliance on expensive informal
sources
Enhance ability to face external shocks
Improve profitability of investments
Reduce distress selling of assets
Increase economic growth
Higher income
More diversified income sources
Less volatile income
Less volatility in household consumption
Increase household consumption
Better education for children
Severity of poverty is reduced
Empowerment
Reduce social exclusion
Insurance services More savings in financial assets
Reduce risks and potential losses
Reduce distress selling of assets
Reduce impact of external shocks
Increase investments
Greater income
Less volatility in consumption
Greater security
Payments/Money
Transfer services
Facilitate trade and investments Greater income
Higher consumption
Feminisation of poverty
In the 1990s microfinance targeting women became a major focus of gender policies as nearly 1.3
billion people in the world lived on less than $1 a day, and the majority were women. Microfinancial
programmes were found to contribute to women‟s economic, social and political empowerment and
today there are many examples of women managing successful businesses. For example in South Asian
villages thousands are shopkeepers, in Afghanistan they sell clothes and jewellery, in Lahore a woman
rents her VCR to male groups and in the Philippines there are wholesale rag sewing businesses and
junk shop businesses that collect empty bottles, for resale to bottling plants.
Today about 25 million women have access to microfinance as they are a good credit risk as well as
they invest their income towards the well being of their families, such as the health and education of
their children. At the same time, microcredit enables them to control assets, make economic decisions
and benefit from higher social status when they are able to provide an income. The Women‟s
Empowerment Program in Nepal found that 68 percent of its members were making decisions,
traditionally made by their husbands, on buying and selling property, sending their daughters to school,
negotiating their children‟s marriages and planning their family. World Education, which combines
education with financial services, found that women were in a stronger position to ensure female
children had equal access to food, schooling and medical care (Littlefield, 2003).
14
Arguments for equity, efficiency, profitability and the impacts on economic and social growth were the
main reasons why most microcredit programmes provided more credit to women, rather than men. A
female focus resulted in greater benefits for the whole family (Kabeer, 1998; United Nations, 1995) as
5% of female microfinance participants were able to lift their families out of poverty each year. (UNDP
Human Development Report, 2003). At the community level women also facilitated economic and
social change.
Sustainable empowerment of women is based on improvement in their bargaining power, within and
outside the family, visible economic and social gain and their participation at institutional and policy
levels. Although these benefits are seen in many projects there are some projects that have
shortcomings that need to be addresses for future improvements. For example microcredit given to
women has been used by their husbands or male relatives, although the ability of the woman to obtain a
loan may strengthen her role within the family. Also after 25 years of microcredit in rural Bangladesh,
ingrained gender values remain unchanged. The significance of purdah and izzat and the role of
marriage in defining a woman‟s identity have perpetuated their subordination and hampered
development efforts (Rozario, 2002).
The prevailing wisdom is that women are helped more than harmed by microcredit but this wisdom is
increasingly challenged as programs are examined more closely. Some studies found a strong
correlation between participation in microcredit schemes and female empowerment and attribute this to
the self-confidence women gain from operating businesses and earning money for the family. Others
point to the paternalism of lenders and the tendency for loans to be captured by men which tend to
negate any empowerment. They also point to the selectivity problem of determining „whether women
who appear to be empowered joined a lending scheme because they were empowered, or became
empowered as a result of their participation. These questions have yet to be resolved‟ (Meade, 2001).
The process of empowerment may be further enhanced by supporting women suffering domestic
violence when tensions in some household‟s increases as women become the wage earner and gain
independence as well as the need to extend the narrow range of female low income activities. The
microloans usually finance „women‟s work‟ which is not performed by men, leading women to rely on
their female children for extra labour, who are often unable to attend school so they can contribute to
the family income (Khander, 1998).
The chances of female-headed enterprises succeeding is often small as seen in Botswana where 75
percent of people engaged in informal business activities were women and that the majority of their
microenterprises either failed or remained at the initial stage of street vending. In Botswana, Kenya,
Malawi, Swaziland and Zimbabwe most enterprises that started with one to four workers never
expanded. (Ntseane, 2000)
In many developing countries women are legally perceived as minors and not permitted bank loans
without the signature of absent, migrant
labourer husbands. Even when they
start a small business they are forced to
fight against a repressive patriarchal
social structure. „Therefore making use
of a microcredit loan is not as easy as
some supporters make it sound‟
(Meade, 2001).
In Pakistan 76% of women living in
low income communities are illiterate,
suffer malnutrition and almost half
have lost a child under two years of
age. These statistics reveal the realities
of poverty in terms of human capital
and the lack of long term investment in
the education and health of their
families. By enhancing women‟s
15
economic opportunities microfinance aims to ensure that each woman can be an alchemist in her own
environment and can make a positive impact on the holistic development of her family and the
community.
Photo 10 Women recycling cardboard and paper in Vietnam with a microloan (S.Bliss)
Human angle on the impacts of microcredit
The impact of a microfinance programme lies in the change it can effect on the lives of ordinary people
and how it inspires responsible citizens to initiate change at the community level. For example in India,
Jhansi Roja caught polio at the age of two, leaving her unable to walk. Her family devoted themselves
to seeking help causing their small plot of land to be neglected and the family forced to sell a major
proportion of the land, leaving them penniless.
Jhansi had heard of a microcredit program called SHARE and formed a working lending group. With
her first loan she opened a small shop selling edibles and after one year took out a larger loan of US$80
to expand the business. With additional profits she took out an agricultural loan to help cultivate her
family‟s remaining land and with further credit purchased a buffalo and a chili grinder. Now she sells
milk and her own chili powder along with other products in her small shop. With this income, Jhansi
now supports her family. (http://www.gdrc.org/icm/human/human-angle.html)
Photo 11: Jhansi Roja
Human face to microfinance-
Microentrepreneur of the
Year
Citigroup, the Microfinance
Council of the Philippines and
the Central Bank awarded
Josephine Alima,
Microentrepreneur of the Year.
In 2000 Josephine, her husband
and four children, made home-
made peanut cookies, starting with one bag of flour a day. Today, they use seven bags to produce 625
packs of cookies and have 24 employees in their bakery. Josephine had a 100 percent repayment rate,
generated employment and sales and reinvestment profits.
http://www.inq7.net/opi/2003/jun/26/opi_mpdoyo-1.htm
Australian perspective
Around 25 percent of Australians cannot access financial services except on the most exploitative and
usurious terms. Interest rates up to 1,000 per cent per anum are not uncommon. The problem is that
lenders are unwilling to provide loans to the unemployed, casually employed or a person receiving
social services, without a credit history and who only want to borrow a small amount of money. The
16
old adage that it is easier to borrow one million dollars than one hundred dollars holds true (Wilson,
2004).
Many low income households in Australia are unable to save, have no assets and are unable to obtain a
small loan from a bank or credit union, for essential household items such as a washing machine, fridge
or medical appliance. In response to this economic and social problem many local community groups
and charities have devised a „No Interest Loan Scheme‟ (NILS) that makes loans to people whose main
income is social security, such as unemployed single mums, old age pensioners or people on disability
pensions. A typical NILS loan is from $600 to $1000, repaid over 12-15 months. Clients can repay
loans each fortnight by direct debit from Centrelink out of their social security entitlements. Around
90% of loans are repaid allowing money to be recycled to further borrowers. The community base is
critical to the success of NILS and the challenge is to expand the scheme to meet the needs of many
Australians living in poverty.
CITYCARE Redfern is an example of a microcredit project in Australia that provides small loans of up
to $400 to disempowered people living in Redfern, Sydney. Loans to establish a home-based small
business, is available to borrowers, unable to obtain commercial credit or credit at unaffordable high
interest rates. The program respects the dignity of their borrowers and supports them as they gain
control of their financial situation. CITYCARE has also increased community co-operation and there
are future expansion plans based on the Grameen Bank model combined with Plan International‟s
approach.
The Brotherhood of St Laurence supports microcredit programmes as a practical way of helping people
move out of poverty. For example the Small Personal Loans Scheme with the Bendigo Bank enables
low income people to both buy white goods and develop a credit history and the Saver Plus program
with the ANZ Bank targets people who want loans for educational purposes as well as encourages
regular savings. Enabling poor people greater access to financial services makes a fairer, more equal,
integrated Australian society.
AusAID makes a bridge over poverty
Anh lives in a slum besides a polluted canal in District 8 Ho Chi Minh City, Vietnam. Although her
family is poor, they are better off since Anh joined the microfinance program, Capital Aid Fund for
Employment of the Poor (CEP). With the loan the family bought a motorbike taxi that generates an
income of ten thousands Dong a day and her two children sell lottery tickets. Anh is now able to repay
1% interest on the loan each month as well as pay for her daughter‟s schooling.
Anh's family is one of ten thousand members, who are gradually stepping out of the poverty cycle.
„CEP meets the needs of the poor that the Government's poverty reduction program does not reach‟
says Mr Le Tan Luc, director of District 8's microfinance branch of CEP. „These include immigrant
labourers who are not registered and therefore not eligible for other government assistance‟.
CEP established in 1991 is a non-profit social organisation with 14 branches in Ho Chi Minh City. Half
of these branches were set up under the 'Microfinance
Expansion Project' funded by the Australian Government
(AusAID). Out of the $6 million, $4 million is used for
lending to the poor and the remainder is used for
technical assistance, building capacity and improving
management
Photo 12: CEP member makes nets
http://www.ausaid.gov.au/vietnam/p040608.cf
m
Conclusions and concerns
In the development process poor people, usually the last to receive financial support, have been able to
access microcredit over the past three decades. Research has shown that most self-employed poor
people can both repay their loan and save enabling many to move out of the cycle of poverty. The
17
achievements in microfinance have been impressive but the policies for microfinance in many
countries remains unfavourable for sustainable growth. For example the low ceiling on interest rates
limits the ability of MFIs to provide permanent access to an increasing number of poor households in
China, Thailand and Vietnam and discourages private sector institutions from entering the industry.
Also most MFIs have focused on creating special programs to disburse funds to poor people with little
attention to building financial infrastructure, such as legal, regulatory and supervisory systems that
strengthens and ensures the sustainability of institutions and promotes participation of private sector
institutions in microfinance.
Huge quantities of financial and human resources to alleviate poverty are required to overcome barriers
created by remoteness, poor infrastructure, a stagnant economy, illiteracy, caste and the low level of
social development of poor rural women and ethnic minorities located in resource poor, remote areas.
To overcome these barriers and empower the poor there is also a need to invest in social intermediation
required to develop human resources (confidence, knowledge and skills) and build local structures that
help poor people participate in the social and political processes, including decision making in
microprojects. Giving people responsibility contributes to the sustainability of the scheme and giving
them ownership of a successful financial institution empowers the poor both socially and politically.
Also at the same time microfinancial institutions can potentially strengthen democratic systems.
Christian Aid believes that if microcredit programmes for poor people are to succeed a macroeconomic
approach is also essential such as Structural Adjustment Policies (SAPs) should be replaced by policies
that promote equitable and sustainable development that gives priority to the needs of the poor. It also
advocates that the World Trade Organisation (WTO) needs to create a fairer world trading system so
the poorest countries can strengthen their local microbusinesses, and that Heavily-Indebted Poor
Countries overseas debts should be cancelled or substantially reduced.
Khandker (1998) found that microcredit programs were not the only solution to the poverty problem as
investment in infrastructure was at least as cost effective as microcredit in increasing consumption
among the rural poor. Obviously there is no single magic solution to eliminate poverty but a sustainable
multifaceted approach to microfinance for the economic, social, technological and political
development of poor people is needed for a more equal and socially just future so hopefully „one day
our grandchildren will go to museums to see what poverty was like‟ (Muhammad Yunus, founder of the
Grameen Bank, the Independent 5 May 1996)
„The microcredit movement which is built around, and for, and with
money is, ironically, at its heart, at its deepest root, not about money
at all. It is about helping each person achieve his or her fullest
potential. It is not about cash capital but about human capital.
Money is merely a tool that helps unlock human dreams and helps
even the poorest and the most unfortunate people on this planet
achieve dignity, respect and meaning in their lives’. Muhammad
Yunus
Photo 13 Mohammad Yunas
Box 1: Did you know?
13 million microcredit borrowers, with US$ 7 billion in outstanding loans, generate repayment
rates of 97 percent. (Virtual Library on Microcredit)
2 per cent of poor people have access to financial services (credit or savings) from sources
other than money lenders. (Virtual Library on Microcredit)
world's seven richest men could wipe out global poverty (Virtual Library on Microcredit)
Micro Banking Bulletin reports that 63 of the world's top MFIs had an average rate of return,
after adjusting for inflation and after taking out subsidies, of 2.5% of total assets. This
compares favourably with returns in the commercial banking sector. (Consultative Group to
Assist the Poorest – CGAP)
MFIs reach self-sufficiency through cost and income structures that vary by region. In Asia
MFIs achieve a high level of profitability due to low costs. In the other regions, such as
Eastern Europe, Latin America and Africa, MFIs face high costs and reach self-sufficiency
through a combination of higher income and productivity. (Microbanking Bulletin, 2002)
18
top 5 MFIs reach almost half of the market. (World Bank Statistics, 2001)
1% of MFIs are financially stable. (World Bank Statistics, 2001)
Citigroup awarded $250,000 to the United Nations Foundation in support of the International
Year of Microcredit 2005
Visual Literacy and Microcredit
Visual awareness, a key element to communication since early cave paintings, has increased in the 21st
century with the growth of the million dollar multimedia industry. Visual literacy defined as the ability
to understand and produce visual messages includes „facial expressions, body language, drawings,
paintings, sculptures, hand signs, street signs, international symbols, layout of pictures and words in a
textbook, clarity of type fonts, computer images, student produced still pictures, sequences, movies or
videos, user friendly equipment design, critical analysis of television advertisements and many, many
other things‟. (http://www.ivla.org/admin/legal/)
Teacher’s role and visual literacy
As students learn more than half of their knowledge from visual information most teachers incorporate
visual images, such as photographs, videos, films, 3D diagrams, cartoons, graphs, sketches and the
World Wide Web into student centred lessons thereby enabling them to acquire a diversity of
perspectives, on a topic, as well as the ability to determine bias and stereotyping in material. Also
students learn more effectively when teachers support lessons using a variety of learning styles. For
example Gardiner found that visual literacy contributed to bodily-kinesthetic, musical, interpersonal,
intrapersonal, linguistic, logical-mathematical and visual-spatial intelligences.
Teachers as educators must show students how to look beyond the picture to understand the deeper
meaning as well as the tactics employed to sway their thinking „Governments and the media commonly
manipulate video and photographs using modern computer technology, raising ethical questions
concerning truth and deception. A picture may be worth a thousand words, but doctoring a photo
sometimes says a lot more. During the last 150 years, photographs repeatedly have been manipulated
for propaganda, fraud, humour, profit and just to rewrite history‟.
http://www.pwc.k12.nf.ca/art/arttech/visualliteracy_files/frame.htm
It is important to note as a teacher that:
„visual skills can be learned
visual skills are not usually isolated from other sensory skills
you can provide appropriate learning environments and materials and allow students to create
their own visual messages
digital literacies (e.g. computer, visual, audio, print reading, information, multi-media) require
different skills
competency in one literacy does not necessarily transfer to another
visual arts can affect student‟s emotions and aid understanding
students need to learn how to recognise and respond to visual and print messages of humour,
irony and metaphor
students require guidance to distinguish between factual and fictional visual representations‟
(http://members.ozemail.com.au/~leemshs/visual.htm)
Digital images and use in the classroom
In the 21st century most teachers and students can produce and use digital images. However a
photograph does not only capture an image but it can express feelings and emotions as well as show the
photographer‟s perspective on the subject. The digital camera can assist visual literacy in the learning
process by being used for the following activities:
showing a diversity of sustainable microcredit organisations around the world
recording excursions or field trips
recording weather, types of clouds, ocean conditions and saline soils
taking photographs of natural and/or built environments e.g. rivers, mountains, buildings,
wetlands, coasts and World Heritage Sites
providing macro or micro views of natural and cultural environments
19
taking images that capture different emotions such as people suffering from hunger or
aesthetically beautiful sites such as Mt Everest
recording sequences of events e.g. rice cycle, changes to vegetation over time, coastal erosion,
changing landuse in the local area, gentrification of inner suburbs or suburbanisation in the
outer western suburbs
producing time lapse movies e.g. formation of a storm and natural disasters such as floods,
droughts, cyclones, tsunamis, fires, earthquakes and volcanic eruptions
recording human interactions with the natural environment eg, clearing land, water, soil and
air pollution
recording human rights abuses, impacts of landmines on people, diversity of cultures,
globalisation (economic, technological and cultural), impacts of terrorism, agricultural
activities and indigenous communities
recording social issues such as child labour and child soldiers
comparing quality of life such as rich/poor, squatter settlements/castles, refugee/head of TNC
and rural/urban communities
gender issues such as work of rural women in developing countries
lesson worksheets, overheads, test items, student‟s assignments, email attachments and self
esteem activities (merit certificates)
assisting teaching in LOTE, ESL and NESB
recording student progress, including difficult-to-record evidence
prepare brochures and flyers to promote United Nations Days (Environment Day) and 2005
Year of Microcredit
„Language is an active process for constructing meaning. Even the quiet listener is actively working to
link prior knowledge and understanding to what other people say. Language develops in a social
context. While language is used in private activities, the use of language almost always relates to
others. Each of us is an active audience for those who create spoken, written, or visual texts‟.
(http://www.state.nj.us/njded/cccs/08langintro.html)
Resources on photo literacy
AusAID free photographs http://photolibrary.ausaid.gov.au or
http://photolibrary.ausaid.gov.au/Cumulus/Standard/index.jsp
New York Times –visual literacy with free photographs
www.nytimes.com/learning/teachers/snapshot/archives.html
International Visual Literacy Association http://www.ivla.org/ Visual Literacy in Teaching and Learning: A Literature Perspective Suzanne Stokes,
Troy State University http://ejite.isu.edu/Volume1No1/pdfs/stokes.pdf
Benedict Visual Literacy Collection: What is Visual Literacy?
http://www.asu.edu/lib/archives/visual.htm
Benedict Visual Literacy Collection: Internet Resources
http://www.asu.edu/lib/archives/vislitlinks.htm
Visual Literacy: Learn to See, See to Learn. Lynell Burmark
Review http://www.nea.org/neatoday/0205/resource.html Handouts
http://www.tcpd.org/burmark/Handouts.html Ethics in Digital News Photography: To Change or Not to Change?
http://www.dcet.k12.de.us/teach/gregg/journal.html Survey of Visual Literacy Definitions
http://www.coe.uga.edu/~dokim/Delphi/second_round.htm
Google advanced image search
http://www.google.com/advanced_image_search?hl=en
Images of Australia http://www.edna.edu.au/sibling/netdays/images.html
Microcredit and student centred activities
Present a collage showing the many faces of poverty
Construct a mind map listing the causes of poverty
20
Sketch the „viscous cycle of poverty‟. Suggest sustainable strategies that could enable a poor
person to move out of this cycle, with dignity.
Draw a cartoon showing the different lifestyles of the rich and poor
Design a poster advertising the International Day for the Eradication of Poverty, 17 October
Suggest school and community activities to celebrate the International Year of Microcredit
2005
Refer to the photographs at the AusAID website. Select 10 photographs that show how
AusAID has improved the lives of many poor people living in developing countries.
http://photolibrary.ausaid.gov.au
How can active, informed, responsible citizens reduce global poverty?
List the advantages of microcredit
Debate for and against providing microcredit to the „poorest of the poor‟
Design a role play illustrating a poor person‟s life before and after a successful microcredit
loan
Why is there a gender bias to microcredit loans?
Visit the Global Education website and the list the facts on poverty
http://www.globaleducation.edna.edu.au/globaled/go/cache/offonce/pid/181;js
essionid=D3B14AE8392B03A724B986A0830F656F
How could you escape poverty if you lived on less than a dollar a day, had few resources,
lived in a remote area with poor soils and extreme weather conditions, such as floods and
droughts. Describe your life. Compare this life with your own.
Organise the class to start a small business such as: selling cakes at lunch time. Organise a
play night or recycle resources. Give the proceeds to an NGO that works to alleviate poverty
in a developing country
In 1990 there were 1.3 billion people living in poverty but in 2002 there were fewer than 1.2
billion. Explain the reasons for the decrease in numbers
Visit the Global Education website and complete the activities
o Living on a limited income
http://www.globaleducation.edna.edu.au/globaled/go/pid/709
o Images of another world
http://www.globaleducation.edna.edu.au/globaled/go/pid/699
o What a difference a loan makes in the Philippines
http://www.globaleducation.edna.edu.au/globaled/go/pid/757
In Guangxi Autonomous Region in southern China, an Australian Government aid program,
implemented by CARE Australia, has been helping poor rural villagers in Du An, Yao
Autonomous County become self employed, increase their incomes and move out of poverty.
Describe how a loan and a multifaceted approach to reduce poverty has improved the quality
of life of these people
http://www.globaleducation.edna.edu.au/globaled/page705.html What is the Yemen-Funding Small Business program? Who benefits? What were the
obstacles? Was it successful?
http://www.worldbank.org/dev360/pdf_files/yemen.pdf
Refer to this website and read the stories of how microcredit can improve the quality of life of
poor people. Answer these key questions. What was the source of the microcredit? How much
did they receive? What was the impact on their life? Describe their life before and after
receiving microcredit? http://www.gdrc.org/icm/human/human-angle.html How can active, responsible Australian citizens help reduce global poverty and make a
difference for a more equal, socially just world?
http://www.globaleducation.edna.edu.au/globaled/go/pid/184
Describe two good news stories http://www.gdrc.org/icm/inspire/papa-
mamma.html What is the Trickle Up program? Evaluate the program
http://www.trickleup.org/index.asp
21
What are the future challenges for microcredit and MFIs if the United Nations Millennium
Development Goals are to be achieved?
Some NGOs play the role of social, but not financial intermediary for funds and report on the
happiness of poor women borrowers rather than the liquidity, solvency, profitability and
efficiency of funds. Discuss the different perspectives on the use of microcredit
Dispel the following myths. Poor people can not save. Poor people are not credit worthy.
Microenterprises can not make a profit
Discussion group. Share your concerns about poverty and microcredit at this website
http://www.globaleducation.edna.edu.au/globaled/page119.html List the reasons for a decline in your parents, relatives or friends income. How would you
adjust to a decline in income? What organisations help families suffering from poverty in
Australia and overseas?
What should you do to start a small business in Australia?
http://www.business.gov.au/Business+Entry+Point/ List small businesses that allow you to work at home?
What are the laws governing small businesses in Australia?
http://www.businesslaw.gov/ Prepare a business plan for a small business.
List the sources of different loans in Australia. How can you get a loan? What are the different
rates of interest? Why do the rates vary? Do you need assets or a reliable income to obtain a
loan? What are the repayment periods? What are the advantages and disadvantages of credit
cards?
Opportunity Knocks is a book that contains the personal stories of 12 people who used small
loans from an Australian based organisation to lift themselves out of poverty.
References on microcredit
Barnes, C. (2001) Microfinance Program Clients and Impact: An Assessment of Zambuko
Trust, Zimbabwe, USAID-AIMS paper, Washington, D.C
Donaghue, K. & Zotalis, S. (2002) Microfinance in the Australian Aid Programme.
Development Bulletin. No 57 February, Development Studies Network, Canberra
Gibbons, D. (2002) Financing microfinance for poverty reduction. Development Bulletin. No
57 February Canberra. Development Studies Network
Gonzalez-Vega, C. (1998). “Do Financial Institutions Have a Role in Assisting the Poor?” M.
Kimenyi et al.(ed) Strategic Issues in Microfinance. London: Ashgate
http://www.geocities.com/jasonmeade3000/Microcredit.html Kabeer, N. (1998) Money can‟t buy love? Re-evaluating gender, credit and empowerment in
rural Bangladesh. IDS Discussion Paper, 363
Khandker, S. (1998 p156) Fighting Poverty with Microcredit: Experience In Bangladesh,
World Bank Oxford University Press
Kilby, P. (2002) Microfinance and poverty alleviation: the dangers of a development „snake
oil‟. Development Bulletin, No 57 February, Development Studies Network, Canberra
Ledgerwood, J. (1999). Microfinance Handbook: an Institutional and Financial Perspective.:
The World Bank, Washington DC
Littlefield, E. (2003) Consultative Group to Assist the Poorest – CGAP Focus Notes. 24
www.cpa.org
Loth, R. (2002) Women Entrepreneurs, The Boston Globe, July 2
Mayoux, L. (1997). The Magic Ingredient? Microfinance and Women‟s
Empowerment Briefing paper for Micro Credit Summit, Washington
http://gdrc.org/icm/wind/magic.html Meade, J. (2001) An examination of the microcredit movement
http://www.geocities.com/jasonmeade3000/Microcredit.html MkNelly, B., and Dunford, C. (1999) Impact of Credit with Education on Mothers and Their
Young Children's Nutrition: CRECER Credit with Education Program in Bolivia, Freedom
from Hunger Research Paper No. 5 (Davis, California Freedom from Hunger).
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Ntseane, Gabo Peggy (2000) A Botswana Rural Women‟s Transition to Urban Small Business
Success: Collective Struggles, Collective Learning”
http://www.edst.educ.ubc.ca/aerc/2000/ntseaneg-web.htm
Report of the World Summit on Sustainable Development, Johannesburg, South Africa, 26
August-4 September 2002, United Nations
Robinson, M. (2001) The Microfinance Revolution: sustainable finance for the poor. World
Bank and the Open Society Instiute, Washington DC
Rozario, S. (2002) Microfinance and women‟s empowerment. Development Bulletin. No 57
February, Development Studies Network, Canberra
Rutherford, S. (2002) The Poor and their money, Oxford University Press
Simonwitz, A. (2002) Appraising the Poverty Outreach of Microfinance: A Review of the
CGAP Poverty Assessment Tool (PAT). Brighton, UK: Imp-Act, Institute of Development
Studies www.imp-act.org.
Unger, J. (2002) Poverty, credit and microcredit in rural China. Development Bulletin. No 57
February, Canberra. Development Studies Network
United Nations (1995), The World‟s Women 1995: Trends and Statistics, UN Social Statistics
and Indicators, Series K (12), New York
Weijland, H. (1999) Microenterprise Clusters in Rural Indonesia: Industrial Seedbed and
Policy Target, World Development; Volume 27, Number 9, pp. 1515-1530
World Bank (2003) Global Economic Prospects and the Developing Countries 2003,
Washington, D.C.
World Bank/International Monetary Fund, Heavily-Indebted Poor Countries Initiative, Fact
Sheet, (March 2003). Accessed at http://www.worldbank.org/hipc/hipc-
review/Fact_Sheet_mar03_.pdf
Yunus, M. (2003). Accessed at http://www.grameen-
info.org/bank/WhatisMicrocredit.html
Other Internet references on microcredit
Information and Communication Technologies (ICT) should be integrated into teaching and learning
activities so that students have the opportunity to become competent, discriminating and creative users
of ICT. They should be able to critically analyse a website, for authorship, bias, authenticity,
applicability and usability as well as the ethics of the site.
Anyone can place information on the WWW, whether it is correct, false or biased and the ability to
critically evaluate information is an important skill in this information age. The "Ten C's" is one
method used to evaluate Internet resources. Visit this site for more information
http://www.uwec.edu/library/Guides/tencs.html Refer to ten of the following Internet sites and complete the website scaffold
ACCION http://www.accion.org/default.asp
ADB Microfinance Strategy
http://www.adb.org/Documents/Policies/Microfinance/default.asp
Alternative Finance Website http://www.alternative-finance.org.uk/en/intro.html Asian Development Bank Microfinance Development Strategy
http://www.adb.org/Documents/Policies/Microfinance/default.asp
AusAID Microfinance links http://www.ausaid.gov.au/links/sub_microfin.cfm
Banking with the Poor http://www.bwtp.org/ Canadian International Development Agency Microfinance and Microenterprise Development
http://www.acdi-cida.gc.ca/microcredit
Centre for Microfinance in Nepal http://www.cmfnepal.org/ Christian Aid Report
http://www.christianaid.org.uk/indepth/9702micr/microcre.htm
Consultative Group to Assist the Poorest http://www.cgap.org/ Developpment International Desjardins-money serving people
http://www.did.qc.ca/Ang/default.html
Eldis Gateway to Development http://www.eldis.org/
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Enterprise Development–Microfinance http://www.enterweb.org/microcre.htm
Epargne sans Frontière http://www.esf.asso.fr/
European Microfinance Network http://www.european-microfinance.org/
Finance and Development Research Programme http://www.devinit.org/findev/
Finca- International Village Banking http://www.villagebanking.org/
Grameen Bank http://www.grameen-info.org/ Ilos Social Finance Programme
http://www.ilo.org/public/english/employment/finance/index.htm
Imp-Act http://www.imp-act.org/ Inter American Development Bank
http://www.iadb.org/sds/MIC/publication/publication_409_174_e.htm
Journal of Microfinance http://www.microjournal.com/
Micro Banking Bulletin http://www.mixmbb.org/en/
Micro Credit Summit Campaign www.microcreditsummit.org
Microcredit Summit Report 2002 http://www.microcreditsummit.org/
Microenterprise online Resource http://www.nissi.org/main_mor.htm
Microfinance- a way to help the poor build assets http://www.microfinance.com/
Microfinance Gateway http://www.microfinancegateway.org/ Microfinance Matters
http://www.uncdf.org/english/microfinance/newsletter/pages/mar_2004/news_
grameen_india.php
Microfinance Network http://www.bellanet.org/partners/mfn/ No Interest Loans Schemes in Australia (NILS)
http://www.nilsnsw.org.au/comm/micro_credit.htm
Planet Finance–Microfinance Platform
http://www.planetfinance.org/planetfinance/EN+Language/planetfinance+-
+Accueil+G%C3%a9n%C3%a9ral.htm
Post Conflict Micro Finance Project http://www.postconflictmicrofinance.org/ Rural Finance in FAO
http://www.fao.org/ag/ags/subjects/en/ruralfinance/index.html
SEEP-Small Enterprise Education and Promotion Network http://www.seepnetwork.org/ Sustainable Banking with the Poor- World Bank
http://www.worldbank.org/wbi/mdflmdf1/poor.htm
United Nations Capital Development Fund
http://www.uncdf.org/english/microfinance/year/index.php
United Nations Economic and Social Development http://www.un.org/esa/
Unitus http://www.unitus.com/
USAID Microlinks http://www.microlinks.org/
Virtual Library on Microcredit http://www.gdrc.org/icm/ Wilson, J, February 2004 Radio National Microfinance– Perspective
(http://www.abc.net.au/rn/talks/perspective/stories/s1037861.htm)
Women‟s World Banking http://www.swwb.org/ World Bank - Sustainable Banking with the Poor
http://www.worldbank.org/mdf/mdf1/poor.htm
CRITERIA FOR EVALUATING WEBSITES ON MICROCREDIT/MICROFINANCE
Website Scaffold
1. Topic
2. Name of site
3. URL
What does the URL tell you? (e.g. gov. au. org.)
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4. Type of site
Is it a virtual tour/fieldwork or web quest?
Are their videos, music or interactive activities?
5. Authorship
Who wrote the page?
Is the author part of a reputable institution or authority?
Does the site have the author‟s biography or email address?
6. Currency
Is it dated?
Is the information recent or obsolete?
Does the site include a last date of modification?
Is the site regularly updated?
7. Authenticity
Is the coverage comprehensive and/or detailed?
Are the sources reliable and authentic?
Is the spelling and grammar correct?
8. Useability
Is the site easy to use and navigate?
Is the content sorted into a logical order?
Is there a search facility?
9. Design
Is their an introduction telling you what the site is about?
Is the design appropriate for the content of the site?
Are maps, graphs and photographs included - relevant and up to
date?
Are their too many blocks of heavy text?
Are their subheadings, bulleted points and highlighted key words?
Are their small thumb nail images of big detailed photos?
Are their links back to the home page?
Did the information lead you to other useful resources and
websites?
Has the site a bibliography?
10. Perspectives
Was the information biased and reinforced stereotypes?
Where other opinions provided?
Did the site promote propaganda and misinformation?
Were their generalisations?
Is the page disguised? (eg as an advertisement)
11. Accessibility
Is the site reliable?
Do the pages download quickly?
Does the address of the site change frequently?