III. International support to microcredit lending
- The present section contains a summary of activities of the United Nations system.
A. United Nations
- In the United Nations Secretariat, the responsibility for assisting in the implementation of the follow-up to the World Summit for Social Development and the servicing of the intergovermental bodies involved rests with the Department of Economic and Social Affairs. The Department is also the focal point for the First United Nations Decade for the Eradication or Poverty. Given its mandate, special attention is given to Africa and to the advancement of women.
- A one-day forum, entitled “Africa Advocacy Forum: Microcredit and Poverty Eradication”, was organized on 6 February 1997 by the Office of the Special Coordinator for Africa and the Least Developed Countries and co-sponsored by the former Department for Policy Coordination and Sustainable Development and Department for Development Support and Management Services and several United Nations agencies. The agenda of the forum focused on five topics related to important aspects of a strategy for poverty eradication. These included the impact of microcredit on food security; women’s economic empowerment/self-employment; and traditional banking systems.
- In July 1997, the Office of the Special Coordinator for Africa and the Least Developed Countries together with the Governments of Japan and Thailand and UNDP, organized the Asia-Africa Forum on the Economic Empowerment of Women, which was held at Bangkok. The forum adopted a framework for action, which includes a recommendation for the promotion of women’s economic empowerment through the promotion of microfinancing schemes, including group financing without collateral, and savings and credit facilities.
- The Office for the Special Coordinator for Africa and the Least Developed Countries also participated in the Sixth International Women Entrepreneurs Conference, held at Accra from 16 to 19 September 1997. The theme of the conference was “Technology and communication on women entrepreneurs in the global economy”. The Office will also be participating in the Second Tokyo International Conference on African Development, which will deal with the issue of rationalizing the microcredit concept in Africa and developing a model that could be applied throughout the African region. With regard to publications, the Office carried out a study on poverty eradication in 14 selected countries, describing experiences of innovative efforts in addressing poverty and underdevelopment. The study showed how microcredit schemes can improve community development.
- Another study on microfinance is being undertaken by the Division of Public Economics and Public Administration. The study will explore various facets of microfinance institutions, including issues related to the financial dynamics of microenterprises and what distinguishes microfinance from commercial finance.
Regional commissions
- As a follow-up to the World Summit for Social Development, and in response to General Assembly resolution 52/194 on the role of microcredit in the eradication of poverty, the regional commissions are undertaking a number of initiatives in the area of microfinance. In the case of the Economic Commission for Africa (ECA), the main objective of its microfinance work programme is to promote microfinancing as a strategic tool for sustaining the operations of microenterprises, including the informal sector, by creating awareness on its role to private development and advising member States on how to articulate policies, strategies and mechanisms for encouraging microcredit and required financial intermediation. In this regard, 1997, ECA carried out a study on reconciling indigenous informal and formal microfinancing systems and practices in Africa, with recommendations to Governments, financial institutions, non-governmental organizations, the private sector and grass-roots organizations. The work programme for 1998-1999 also includes a study on the role of microfinancing on the sustainable development of small and medium-sized enterprises. Since 1992, the Commission has been implementing a pilot project in Ethiopia and Zambia on the promotion of the informal sector on the economic development of Africa. It is expected that the project will next be implemented in Cote d’Ivoire and Ghana. ECA plans in the coming years to disseminate the results of the pilot project among other African countries by publishing a manual on the tested participatory approach, holding subregional workshops, and reinforcing advisory services to ECA member states. In this regard, ECA also intends to take measures to strengthen cooperation with bilateral and multilateral partners.
- Like other regional commissions, the Economic and Social Commission for Asia and the Pacific (ESCAP) provides a mechanism for exchange of experience on microcredit facilities among interested countries and a way of drawing up best practices and modalities of assessement and of proposing new approaches. In preparation for a regional consultation on strengthening of rural financial institutions, ESCAP undertook five country studies (Bhutan, Indonesia, Nepal, Philippines and Viet Nam) during the second half of 1997. The objective of the studies and consultations was to examine critically the efficiency of non-formal credit organizations in providing credit to the rural poor, for microfinance activities, and to suggest policy alternatives for reaching the large numbers of credit-needy rural poor households within the next decade.
- A multi-year project on enhancing the access of women to formal credit and financial institutions in the least developed countries has been completed. The project involved a series of country case studies and national workshops, a regional seminar and two publications on improving the access of women to formal credit and financial institutions. The intention of the project was to evaluate the potential of the major constraints faced by women in obtaining credit from formal financial institutions such as banks, to identify special features of successful formal credit programmes and to formulate recommendations. As a result of the project, there is now much more awareness among central banks and major financial institutions in the six least developed countries of the Asian region to the problems faced by women.
- The Economic Commission for Latin America and the Caribbean (ECLAC) carried out a project on small and medium-sized enterprise financing in seven countries (Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador and Mexico). The project showed that current approaches to small business finance were based on the experience of previous policies that focused on credit subsidies and had meagre results. New approaches to small-scale enterprises were part of market-oriented policies. These approaches have frequently proposed ambitious goals regarding access of smaller businesses to financing technical training and technical and financial assistance. However, actual implementation of those measures is still at an experimental stage.
- The Economic and Social Commission for Western Asia (ESCWA) has a number of activities for promoting entrepreneurship in small enterprises, including the provision of assistance to countries and institutions of the region. One of its major activities is providing support to start up business and building national training capabilities. A number of “start your own business” courses for potential entrepreneurs, and potential trainers, in cooperation with local institutions, have been conducted since 1990. To that effect,ESCWA produced a trainers manual in Arabic on starting your own business. An understanding was reached early in 1996 between ESCWA and the United Nations Development Fund for Women (UNIFEM),in which ESCWA provided technical assistance to a UNIFEM project entitled “Strengthening institutions for the development of women enterprises” in Jordan, Lebanon, the Syrian Arab Republic and the Palestinian territories. ESCWA assistance to the UNIFEM project was in the areas of entrepreneurship training and business counselling, information and business incubators. ESCWA,in cooperation with UNIFEM and the Development Employment Fund of Jordan, organized the simulation exercises and learning laboratories development camp at Amman from 6 to 11 December 1997. One of the major objectives of the camp was to upgrade trainers’ skills in adapting existing training materials and designing new ones to meet the needs of various target groups in urban and rural areas, with emphasis on the poor. Particular consideration was given to the development of microbusinesses. In the programme of work for 1998-1999, ESCWA is expanding its activities on microcredit under the subprogramme on improvement of the quality of life. Focus is given in that subprogramme to the eradication of poverty, with microcredit as one possible tool. The following areas will be covered: the role of income-generating activities in eradicating poverty and improving the standard of living in local communities; the role of the informal sector in community development; the social impact of structural adjustment, with special emphasis on unemployment; and operational microcredit lending facilities to poor women in rural and urban areas.
- In assessing the role of microcredit in the economies in transition, the Economic Commission for Europe (ECE) underlined the fact that, although many countries, including the Czech Republic, Hungary, Poland, Slovakia and Slovenia, have recognized the need to develop microenterprises, particularly in areas facing high unemployment rates, entrepreneurs have limited access to sources of finance. The reasons include the following:(a) financial institutions consider it risky to lend to micro and small businesses because of the high failure rate, economic uncertainties and lack of collateral;
(b) commercial and credit banks have no experience in dealing with microenterprises, and the high administrative costs involved in processing small loans;
(c) lack of transparency in evaluating loans and lack of skills of financial institutions in dealing with microenterprises;
(d) in almost all countries of the region, the national clearing systems are poor and outdated and, consequently, the majority of the transactions are made in cash because of uncertainties and delays encountered by the electronic money transfer systems; and
(e) lack of reliable data regarding markets.To help overcome these problems, ECE is supporting the following:(a) favourable national policies on microenterprises and microcredit organizations;
(b) evaluation of current experiences through surveys and workshops;
(c) elaboration of medium-term and long-term capacity-building programmes to create cost-effective and self-sustaining microcredit organizations; and
(d) creation of long-term national and international grants and funds to implement national programmes.
