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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).

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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

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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).

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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

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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

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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.

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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)

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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

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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

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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

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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?