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Speech Excerpts from the Microcredit Summit +5

Plenary Session: Ensuring Impact

International Year of Microcredit

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Plenary Session: Ensuring Impact

Remarks by Lennart Båge

As you know, we in IFAD focus exclusively on reducing poverty in the rural areas. That's our mandate. And as you know, three-quarters of the extreme poor, 900 million of the 1.2 billion living on less than a dollar per day, live and work in rural areas, and it is our clear experience over 25 years of activity, that these people can benefit from microfinance and that microfinance is a key element for them in their fight to overcome poverty.

At the Microcredit Summit, five years ago, we were proud to present an institutional plan of action for IFAD. In that document, we pledged that 30 percent of our portfolio would promote microfinance and contribute to the summit aim of reaching 100 million of the world's poorest families by 2005. I am pleased to report to you that we have delivered on that pledge and each year we direct more than $100 million in financial services to the rural poor. We have also developed a comprehensive rural finance policy, a mainstream microfinance outreach within the broader strategy of poverty reduction. Our commitment to supporting rural finance has never been greater.

...The standard lending approaches of many MFIs will not automatically work for the poorest. On this basis, the paper provides useful recommendations on ways to define services and outreach mechanisms that can meet the needs and the experience of these populations....

First, we could encourage more transparent reporting on levels of poverty outreach from the microfinance institutions. For us, we see the issue of transparent reporting as the starting point, for an open and frank dialogue with our rural finance partners on how they may in some instances, not be able to increase their poverty outreach.

Secondly, despite the very promising breakthroughs that we have witnessed in the signing of financial protocols to better meet the constraints for the poorest, we still need to remember that lending should be based, ultimately, on the assessment of the borrower's repayment capacity. Continuing provision of credit to the poorest should be approached with the prudent requirement that microfinance does not burden poor people with unsustainable or unproductive debt.

Read remarks by Elizabeth Littlefield