Reuters news item on UN Report -
ROLE OF MICROCREDIT IN THE ERADICATION OF POVERTY
UNITED NATIONS, Sept 1 (Reuters) - Programmes that provide small loans to poor
families are highly overrated as a primary means of reducing poverty throughout
the world, a United Nations report said on Tuesday.
The concept of microcredit programmes skyrocketed to prominence in the last 10
years, especially as a way of enabling poor women to start small businesses.
U.S. First lady Hillary Clinton, among others, has visited successful projects
run by women in several Asian countries.
And last year, donors at a microcredit conference in Washington agreed to
extend small loans to 100 million poor households by the year 2005 at a cost of
But the report by the U.N. Department for Economic and Social Affairs said the
concept had its limits if it sought to be a substitute for overall long-term
It said the funds expended were modest and that the poorest of the poor lacked
business skills to participate in such programmes during a period of dwindling
"Furthermore, many claims of high rates of repayment or of stable improvements
in the standard of living of borrowers are not consistently or convincingly
substantiated, despite the proliferation of literature in this area," said
Nevertheless, the report said small-scale lending arrangements had considerable
success in several areas, especially the Grameen Bank in Bangladesh, which has
compulsory weekly public meetings for participants.
Other programmes mentioned include Thailand's Bank of Agriculture and
Agricultural Cooperatives, institutions in Senegal, Guinea, Burkina Faso, Mali
and Bolivia as well as the Accion Internacional with $1 billion in loans to
Latin Americans in the last five years.
But the report's principle author, James Kanu of Sierra Leone, warned against
siphoning scarce development assistance funds away from agriculture, health,
sanitation, education and infrastructure repairs "for relatively untested
Noting that foreign aid has been declining rapidly over the past decade, he
said that it was "important that resources are channelled to sectors that have
potential, especially agriculture, infrastructure and education."
The report said that many microcredit programmes lacked support services or a
linkage with other public sector activities, such as land reform, which may be
needed for such projects.
It recommended that loans be provided in the context of access to land,
appropriate technology, counselling and other projects, such as credit unions.
"Microfinance should be conceived as one component in an overall strategy to
foster small business enterprise," the report said.
"Without long-term sustainability, a microcredit institution is in danger of
collapsing or of becoming a thinly veiled charity," the report concluded
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