Microfinance Reports

Did 137 million of world’s poorest receive a Microloan in 2010 ?

Recently we came across a note from Microcredit Summit Campaign titled

Record 137 Million of World’s Poorest Received a Microloan in 2010

More than 137.5 million of the world’s poorest families received a microloan in 2010-an all-time high, according to a report released today by the Microcredit Summit Campaign. Assuming an average of five persons per family, these 137.5 million microloans affected more than 687 million family members, which is greater than the combined populations of the European Union and Russia. Microloans are used to help people living in poverty in both industrialized and developing countries to expand a range of small businesses, such as selling products in a local market, making clothes, and providing computer and other business services in rural areas.

The report’s release precedes the Global Microcredit Summit 2011 to be held November 14-17 in Valladolid, Spain, which will be inaugurated by Her Majesty Queen Sofía and Nobel Peace Prize laureate and Grameen Bank founder, Muhammad Yunus.

microcredit world

“At the first Microcredit Summit in 1997, only 7.6 million of the world’s poorest families had been reached,” said Prof. Yunus, who will arrive for the Summit later this week. “While the growth in numbers has been inspiring, we must keep our attention on the wisdom from the clients. The report tells us that when asked what they want for themselves and their families, their answers include, ‘education for their children, health for their family, decent housing that keeps the rain and cold out, and regular, nutritious meals.’ This is what we will pursue when we gather at the Microcredit Summit in Valladolid.”

While more than 205 million people worldwide received a microloan in 2010, this multi-year campaign focuses on outreach to the poorest clients. According to the report, over the last 13 years, the number of very poor families with a microloan has grown more than 18-fold from 7.6 million in 1997 to 137.5 million in 2010. The latest data comes from more than 3,600 institutions worldwide, with more than 94 percent of the information having been collected within the last 18 months.

However, in the last year microfinance has faced setbacks as well. An initial public offering of SKS, a microfinance institution (MFI) based in Andhra Pradesh, India, was followed by charges of over-indebtedness and suicides among clients in that state, resulting in a clamp-down by the state government last October.

“While our progress has been stunning, the challenges in Andhra Pradesh and elsewhere will take a toll,” said Campaign director Sam Daley-Harris. “As of August 31, 2011 when this report was completed, the situation in Andhra Pradesh had not yet improved, and repayment rates of MFIs there were reported as low as 10 percent. Were we, therefore, to deduct 90 percent of the Andhra Pradesh numbers from our calculation of clients reached, we would see nearly 200 million total clients and more than 132 million poorest clients reached in 2010. This represents more than 5 million clients who received loans in 2010 but may not receive loans in 2011.”

The report also highlights the number of poorest women reached. Not only have these women been the most excluded from traditional banking, but they are also the ones most likely to ensure that the increased income is used to improve the lives of their children. From 1999 to 2010, the number of poorest women reached has increased from 10.3 million to 113.1 million.

Download the report online at http://www.microcreditsummit.org/pubs/reports/

Are these figures given by the Microcredit Summit Campaign correct or exaggerated ?

Our reader S Santhanam analyses these claims in an email we received and which we have reproduced below :

Dear Mr Abhay

At the outset, my sincere thanks to you for including me in your mailing list and sending me  updates very regularly. Last week, I received one news mail from Micro-Credit Summit Campaign which I have forwarded to you now. But, I have a couple of observations, particularly about the assessment of 137 Million poorest as those received micro-credit as claimed by the MCSC, which I would like to share with your magazine also.

Firstly, taking into account 5 members per family and arriving at 687 Million is erroneous. In countries like India where micro-finance market is a huge one with one member taking as many as 10 loans and in a family all the members taking loans from one MFI or the other is becoming very much common. Please see the Micro-finance -State of the Sector Report 2010 by Access Development Services. It may not be very much different in a number of countries in the Asia Pacific region.

Secondly, the term ‘poorest’ used as those received micro-credit is also not correct as empirical evidence from reports of CGAP and other agencies both national and international, have proved that a large portion of micro-credit has gone to the poor and not so poor and not to the poorest. In fact, the CGAP once called itself ‘Consultative Group to Assist the Poorest’ has changed its name to call itself by the name ‘Consultative Group to Assist the Poor’, as they found that the ‘Poorest’ needed different type of intervention other than micro-credit which CGAP in its earlier avatar could not deliver. So, it will be the responsibility of agencies like MC Summit Campaign to bestow attention to details before making important announcements to the world at large as people take these figures as authentic.

It is necessary to be responsible in making public announcements particularly by responsible institutions like MCSC. I request you to consider publishing both the MCSC news and my observations in your magazine for the benefit of all those associated with the micro-finance sector.

With Best Regards

S Santhanam
Consultant – Development Finance
Pune , India


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