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Empowering Women with Microcredit

2000 Microcredit Summit Campaign Report

Compiled and edited by:
Lise Adams
Anna Awimbo
Nathanael Goldberg
Cristina Sanchez
 

With assistance from:
Sarah L. Crowe
Rony Guiteau
Denise Hughes
Mamie Lawrence
Ruth Moreno
Jason Morris
Heather Staley

Contents:
 Overview
 United Nations Fourth World Conference on Women in Beijing
 The Microcredit Summit
 Four Core Themes: Setting the Direction
 Survey Methodology
 Findings
 Looking Ahead
 Appendices

Rajamma lives in Karnataka, India.  Before she received her first loan from The Bridge Foundation (TBF), she was doing housework in "upper-caste" homes so she could feed her daughters the leftover scraps of food. She became so desperate that she borrowed money from a rich landowner. Unable to repay him, she was forced to send her daughters to work in his home--as virtual slaves. Rajamma joined TBF's local Self Help Group and took out a loan of Rs 7,000 (US$196) to purchase a milk cow. Within 10 months, she cleared the loan and released her daughters from their bond. She earns over Rs 1,200 (US$34) each month. With her savings she bought half an acre of land and has taken another loan to irrigate it for groundnut cultivation. Rajamma's eldest daughter is learning tailoring while the younger girls are in school.

With visible pride, Rajamma says that TBF has helped her regain her dignity and self-worth. She is one of the most active members in the group and is accepted as an equal in her village.

Overview

The Microcredit Summit Campaign was established in 1997 in response to the desperate need of hundreds of millions of women like Rajamma. The Campaign seeks to reach 100 million of the world’s poorest families, especially the women of those families, with credit for self-employment and other financial and business services by 2005. Over the last three years, 1,065 microcredit[1] institutions have reported the number of clients they are reaching to the Campaign, 512 of them reporting in the last five months. This document assesses the Campaign’s contribution to the objectives of the Fourth World Conference on Women held in Beijing in 1995. From self-reported data, we find that these 1,065 institutions are reaching 13.8 million poorest clients[2], 10.3 million or 75 percent of whom are women. At the time of the 1997 Microcredit Summit it was estimated that eight million poorest clients were being reached. That estimate was supported in a Campaign survey done the following year. The most recent survey indicates an increase of more than 6 million poorest clients being reached over a two year period[3] (January 1, 1998 to December 31, 1999), an increase of 82 percent. Of the 512 programs reporting data that covers January 1, 1999 to December 31, 1999, the growth in the number of poorest women being reached over the last year is 1.4 million, an increase of 16 percent. While this progress is impressive, the Campaign still has a long way to go to fulfill its mission over the next six years.

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United Nations Fourth World Conference on Women in Beijing

The United Nations Fourth World Conference on Women, held in Beijing in September 1995, was the largest gathering ever to focus on the well-being of women. It attracted tens of thousands of women and men from around the world who came determined to find ways to end the marginalization and subjugation of women like Rajamma.

Rajamma is not alone. The World Bank estimates in its World Development Indicators 2000 that 1.2 billion people around the world live on less than $1 a day. According to the United Nations Development Program’s Human Development Report 1999, "Nearly 340 million women are not expected to survive to age 40." An intergenerational transfer of poverty along gender lines ensures that girls born into poverty become women who will remain in poverty. Gender bias and the low priority on young women in existing poverty alleviation programs further restrict the abilities and opportunities of young women to improve their lives.

It was with these grim realities in mind, and the fact that most of the goals from the 1985 Nairobi Third World Conference on Women were not met, that delegates to the 1995 Fourth World Conference on Women called upon all sectors of society to act upon the following 12 critical areas of concern:
 

• The persistent and increasing burden of poverty on women;
• Inequalities and inadequacies in, and unequal access to, eduation and training;
• Inequalities and inadequacies in, and unequal access to, health care and related services;
• Violence against women;
• The effects of armed or other kinds of conflict on women, including those living under foreign occupation;
• Inequality in economice structure and polices, in all forms of productive activities, and in access to resources;
• Inequality between men and women in the sharing of power and decision-making at all levels;
• Insufficient mechanisms at all levels to promote the advancement of women;
• Lack of respect for, and inadequate promotion and protection of, the human rights of women;
• Stereotyping of women and inequality in women's access to, and participation in, all communication systems, especially in the media;
• Gender inequalities in the management of natural resources and in safeguarding of the environment; and
• Persistent discrimination against and violation of the rights of the girl child.

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The Microcredit Summit

Inspired in part by concerns raised at the Beijing Conference, more than 2,900 people representing 1,500 institutions from 137 countries gathered at the Microcredit Summit in Washington, D.C. in February, 1997. Delegates set the ambitious goal of reaching 100 million of the world’s poorest families, especially the women of those families, with credit for self-employment and other financial and business services by the year 2005. While not a panacea, microcredit provides a powerful tool for progress in nearly all of the 12 critical areas of concern outlined at Beijing.

Consider Elvia, a 25-year-old single parent from Guatemala, a country where the non-governmental organization CARE USA reports that approximately 20 percent of women under 18 become unwed mothers. Elvia comes from a large, poor family of 11 brothers and sisters. She became pregnant at 19 and was abandoned by the baby’s father. She later took loans from CARE and created a sewing and chicken-raising business. With her mother she sells 600 chickens every seven weeks. She vows to ensure that her six year-old daughter will not make the same mistakes she has made.

Elvia’s involvement in this microcredit program has brought positive changes to her own life, changes that reflect progress in a number of the Beijing Conference’s 12 critical areas of concern. The microcredit program has begun to reduce the poverty of three generations of women in her family, improved the likelihood that her daughter’s education will be better than her own, and that both will have better health care. The credit program has improved Elvia’s access to financial resources, increased her power and ability to make decisions for herself, and ensured the advancement and human rights of both the women in her family and the women in her borrowing group. The program has given her the ability to look beyond her survival needs and help safeguard her environment and improved her ability to uphold the rights of the girl-child, her own daughter.

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Four Core Themes: Setting the Direction

At the launch of the Microcredit Summit, too many in the field of microfinance argued for a focus on building financially self-sufficient institutions at the expense of reaching the poorest families. However, members of the Microcredit Summit Campaign are demonstrating that there does not have to be a trade-off. Combining institutional financial self-sufficiency with reaching the poorest is attainable and urgently needed.

The Microcredit Summit Campaign has four core themes, extracted from the Summit’s 55-page Declaration and Plan of Action. The four core themes are:

1. Reaching the Poorest:  The Summit recognizes that the field of microfinance includes institutions providing financial and other services to constituencies that -- while not necessarily among the poorest -- are overlooked by the traditional banking sector.  However, the Summit specifically focuses on reaching the poorest families, defined in the Declaration and Plan of Action as families in developing countries among the bottom 50 percent of those living below their nation’s poverty line.  Another way of looking at this target is to see the 1.2 billion people living in absolute poverty as comprising some 240 million families.  These 240 million families comprise the group from which most of the Microcredit Summit’s target of 100 million poorest will come.  Within industrialized countries the Summit is focused on all of those living below their nation’s poverty line.  The Summit’s in-depth work to promote the use of quality poverty measurements is outlined on pages 8 and 9.

2. Reaching and Empowering Women:  Experience shows that women are a good credit risk, and that woman-run businesses tend to benefit family members more directly than those run by men. [4] At the same time, through earning an income women achieve a higher status in their homes, their communities, and their nations.

3. Building Financially Self-Sufficient Institutions: The Declaration and Plan of Action emphasizes the importance of programs in developing countries reaching financial self-sufficiency. Experience has shown that microcredit programs in developing countries can improve their efficiency and structure their interest rates and fees to eventually cover their operating and financial costs.  This is demonstrated powerfully in a paper commissioned by the Campaign titled: The Microcredit Summit’s Challenge: Building Financially Self-Sufficient Institutions While Maintaining a Commitment to Reaching the Poorest.  Day-long courses offered by the Campaign at global and regional meetings held from 1999 through 2001 train practitioners in this area.

Through the economic context in industrialized countries is radically different, the Summit encourages programs in industrialized countries to explore ways of becoming self-sufficient so that, to the greatest extent possible, their operating costs will be covered through direct revenue from program services.

4. Ensuring a Positive, Measurable Impact on the Lives of Clients and their Families:  While financial measures such as program repayment rates give an indication of the strength of a microcredit institution, the Microcredit Summit is committed to programs having a positive, measurable impact on the lives of the very poor. Two impact assessment studies conducted by the non-governmental microcredit organization Freedom From Hunger showed that current clients of its affiliate institutions in Honduras and Mali experienced positive program impact at the individual, household, and community levels. The studies demonstrated that when compared to non-clients, current clients were more likely to have larger enterprises; experience an increase in personal income and household food consumption; have personal savings; and feel a greater sense of empowerment and higher self esteem.[5]

Within the Microcredit Summit Campaign the theme of ensuring impact is addressed in a paper titled: Measuring Transformation: Assessing and Improving the Impact of Microcredit, and in day-long courses offered at global and regional meetings.

The four core themes of the Microcredit Summit Campaign help focus the Campaign not only on the number of clients reached but also on the quality of the practitioners’ work. The Campaign will have failed if 100 million families are reached, but they were not among the poorest when they joined the program. The Campaign will have failed if 100 million families are reached, but few of the clients were women. The Campaign will have failed if 100 million families are reached, but the institutions are not strong enough to continue providing services to future clients. The Campaign will have failed if 100 million families are reached, but there is little impact on the lives of the clients and their families.

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Survey Methodology

This report is based upon results from a survey undertaken by the Microcredit Summit Secretariat. As of December 1999, more than 1,600 microcredit institutions had joined the Summit’s Council of Practitioners. In doing so, each institution endorsed the Summit’s goal and agreed to submit an Action Plan within one year of joining the council. The Action Plan outlines how each institution will contribute to the Summit’s goal.

In November 1999, Institutional Action Plan grids for the year 2000 were mailed in English, French, and Spanish to these 1,600 institutions. The two-page grid asked questions such as: 1) how many active clients did you have as of December 31, 1999? 2) how many of those clients were among the poorest when they joined the program? 3) what poverty measurement did you use to determine this? 4) what percent of the poorest clients were women? 5) what was the average size of the first loan? 6) how many active savers do you have? 7) what is the average savings? 8) what was the percent of institutional financial self-sufficiency? 9) what percentage of the clients, who were among the poorest when they joined the program, have crossed the poverty line?

All practitioner Action Plans submitted in 1998 and 1999 were reviewed by Summit staff for clarity. This process continues with the Action Plans submitted in 2000. Letters are sent to each institution asking for clarification of certain aspects of their plan or acknowledging receipt if no clarification is needed. This review process should not be taken as an indication of verification.

In an effort to verify the data from some of the largest institutions in the world, however, the fifty largest institutions in each of the following regions -- Africa, Asia and Latin America -- were asked to provide the Campaign with donor agencies, research organizations, networks, and other institutions that could verify their data. The results can be found in Appendix 1 along with a detailed explanation of the verification process.

In order to encourage responses for this year’s report, the Microcredit Summit Secretariat conducted a phone campaign reaching 270 of the largest 325 programs that had previously reported to the Campaign. These 270 programs, estimated to reach nearly 90 percent of the poorest clients, were encouraged to submit the 2000 Action Plan.
 

The totals in this report have been calculated from three categories of responses: 1) 512 institutions that turned in a 2000 Action Plan during the last five months, 2) 191 Institutions that did not turn in a 2000 Action Plan but submitted a 1999 Action Plan, and 3) 362 institutions that neither turned in a 2000 nor a 1999 Action Plan, but turned in an Action Plan or Institutional Profile in 1998 or 1997. This latter category, comprising 362 institutions, accounts for 1,333,079 total clients, including 779,395 poorest clients, 52 percent of whom are women. These poorest clients account for less than 6 percent of the overall total of poorest clients.

Again, we must stress that the data in this document is self-reported and that there is an insufficient number of inexpensive poverty measurements in use. To this end, the Microcredit Summit Campaign is working with practitioners to identify and implement cost-effective poverty measurements (see finding 2).

What follows are results from the larger survey of 1,065 microcredit institutions and from the survey of those institutions whose data was verified.

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Finding 1: Programs report reaching 82 percent more poorest clients (over 6 million more poorest families) during the two year period from January 1, 1998 to December 31, 1999. The numbers increased from 7.6 million at the end of 1997 to 13.8 million at the end of 1999.

512 programs are reporting a 16 percent increase in the number of poorest women reached in the past year (January 1, 1999 to December 31, 1999), an increase of 1.4 million poorest women.

1,065 established microcredit practitioners responded to the survey. These programs report reaching 23,555,689 active clients. According to the information these programs provided, they are currently serving 13,779,872 of the poorest families, 75 percent of whom are women.
 

Year	Total number of client reported	Number of "poorest" clients reported	Number of "poorest" clients who are women
12/31/98 1,065 institutions	20,938,899	12,221,918	8,839,706
12/31/99 1,065 institutions	23,555,689	13,779,872	10,273,900

Analysis By Region
 

Region	Number of programs reporting	Number of clients reported 1998	Number of clients reported 1999	Number of poorest1 clients reported 1998	Number of poorest1 clients reported 1999	Number of women clients poorest1 reported 1998	Number of women clients poorest1 reported 1999
Africa	455	2,974,318	3,833,565	2,149,517	2,617,861	1,142,614	1,526,267
Asia	352	16,798,605	18,427,125	9,513,544	10,498,656	7,350,121	8,316,313
Latin America & Caribbean	152	989,800	1,109,708	452,436	531,228	290,364	355,253
Middle East	16	44,225	46,925	28,071	28,807	15,501	15,680
Developing World Totals	975	20,806,948	23,417,323	12,143,568	13,676,552	8,798,600	10,213,513
North America	48	40,439	46,925	28,071	28,807	15,501	15,680
Europe & NIS	42	40,439	43,750	16,566	18,519	11,144	13,022
Industrialized World Totals	90	131,951	138,366	78,350	103,320	41,106	60,387
Global World Totals	1,065	20,938,899	23,555,689	12,221,918	13,779,872	8,839,706	10,273,900

1 The Summit Declaration anticipated that the majority of borrowers would be in the developing world. However, microcredit has proven to be effective in industrialized countries as well, despite a radically different economic context. In industrialized countries the Campaign is focused on the poor, those families who were living below their nation's poverty line when they received their first loan and/or training and technical assistance.

As mentioned above, the Microcredit Summit Campaign has initiated a confirmationa process with the Institutional Action Plans submitted in the year 2000. The fifty largest institutions in each of the following regions--Africa, Asia and Latin America--were asked to provide the Campaign with donor agencies, research institutions, networks and other institutions that could cooroborate their data.

The data from 78 practitioner institutions was confirmed[6]  by at least one other organization. These 78 institutions report reaching 9.3 million poorest at the end of 1999, or 67 percent of the total number of poorest clients reported. Eighty percent of these 9.3 million poorest clients are women.

The Summit expects the early years of the Campaign to be characterized by the modest growth of many small programs and the establishment of new programs. While growth in the number of borrowers is important, the Summit is more concerned with helping these new and expanding programs focus on reaching the poorest, especially women; develop self-sufficient institutions; and adhere to other best practices, which are essentially sound business practices.

It should be stressed that this data does not represent the total number of microcredit programs or clients in the Campaign or worldwide. (More than 600 practitioner institutions in the Campaign have not yet reported on their programs.) The Summit is also unable to determine how many clients are participating in more than one program. In order to avoid double-counting, this report uses data from individual programs rather than totals from networks. The only exception is the Association of Asian Confederation of Credit Unions, whose data was carefully reviewed to assure the absence of double-counting.

Finding 2:  Two-thirds of the 512 institutions submitting data this year report using a poverty measurement tool other than an estimate.  Of this group, 30 percent, 102 institutions, report using one of the two tools from the Microcredit Summit Campaign’s Poverty Measurement Tool Kit (see below). The Microcredit Summit Campaign continues to face a central challenge if the Summit’s goal of reaching 100 million poorest is to be achieved.  The Campaign must help an increasing number of practitioners identify and implement effective, inexpensive, and easy-to-use poverty measurements.

1. Established the Poverty Measurement Discussion Group in 1998 to help identify simple, reliable, cost-effective poverty measurements applicable in different regions of the world. By collecting and disseminating this information, the Campaign intends to support practitioners in adopting the most effective techniques for identifying and reaching the poorest families. The first, second, and third papers of the Poverty Measurement Discussion Group can be found on the Campaign website: http://www.microcreditsummit.org/discussion.htm

2. Created the Microcredit Summit Poverty Measurement Tool Kit (PMTK). The first two measurements included in the Summit’s PMTK are the CASHPOR House Index, for use in rural Asia, and Participatory Wealth Ranking. While the Summit is not necessarily proposing that these measurements be used to screen out clients, those microcredit programs that wish to serve the poorest families and have a methodology that easily incorporates these tools may find them useful in assessing the poverty level of the clients they serve. These tools, and others to be identified for the tool kit, will be used to assess progress toward the Summit’s goal of reaching 100 million of the world’s poorest families. In addition, the Summit will distribute a 30-minute training video in English and French, and eventually in Spanish, on using Participatory Wealth Ranking. Discussions are underway on creating a training video for using the CASHPOR House Index.

3. Commissioned a paper entitled, "Overcoming the Obstacles to Identifying the Poorest Families." This paper was discussed in plenary session at the Summit’s Meeting of Councils held in June 1999 in Abidjan, Ivory Coast. The paper is currently being updated and will be discussed in plenary session at regional meetings in 2000 and 2001 in Africa, Asia, and Latin America. More than 3,000 copies of the paper have been circulated in English, French, and Spanish. It is also available in Arabic and Chinese and will soon be available in Russian. Copies of the paper can be found on the Campaign website:  http://www.microcreditsummit.org/papers/povertypaper.htm

4. Commissioned a paper entitled, "The Microcredit Summit’s Challenge: Building Financially Self-Sufficient Institutions While Maintaining a Commitment to Reaching the Poorest Families." The paper challenges the conventional wisdom that suggests that these two priorities are mutually exclusive. It was circulated as above and is also available on the Summit’s website ( http://www.microcreditsummit.org/papers/challengespaper.htm ).This paper is also being updated and will be discussed in plenary session at Regional meetings in 2000 and 2001 in Africa, Asia, and Latin America.

5. Organized day-long courses at the Summit’s Meeting of Councils held in June 1999 in Abidjan, Ivory Coast on "Learning to Identify the Poorest Clients" and on "Learning to Build a Financially Self-Sufficient Institution While Maintaining a Commitment to Reaching the Poorest." These courses will be offered at regional meetings in 2000 and 2001 in Africa, Asia, and Latin America, as will training-of-leaders sessions on these topics.

6. Identified which poverty measurements practitioners are using to determine the number of poorest clients.   For the first time, the 2000 Action Plan grid asked what poverty measurement an institution used to determine the number of poorest clients. As mentioned above, the survey showed that two-thirds of the institutions reporting in 2000 are using some poverty measurement tool other than an estimate. Of this group, 30 percent are using one of the two tools from the Poverty Measurement Tool Kit.

7. Hired Summit staff based in Africa and Asia to bring the Campaign’s message and best practices to every nation on those continents. The Campaign’s efforts have expanded from the Secretariat’s headquarters in Washington, DC to include meeting face-to-face with practitioners in the field. Our new Africa and Asia Organizers are charged with expanding the Summit Council of Practitioners, increasing the number and improving the quality of Action Plans submitted, and promoting the use of best practices with a special focus on reaching the poorest. The Campaign is committed to opening an office in Latin America as well.

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Looking Ahead

The Campaign survey shows growth in the number of clients being served by microcredit programs. The data also suggests an increase in the number of institutions now using poverty measurements to determine the number of poorest families being served. The Campaign will continue to push for the development of simple, cost-effective measurements for determining the poverty-level of microcredit clients through the Poverty Measurement Discussion Group and the Poverty Measurement Tool Kit.

The challenge of identifying and reaching the poorest must be addressed if tens of millions of women like Rajamma and Elvia are to have an opportunity to build a better life for themselves and their families. There are many reasons why the poorest are excluded from microcredit programs. They are least likely to step forward, so identifying and motivating them bring additional costs. The small size of their initial loans make it more difficult for an institution to become financially self-sufficient. But the goals set at the Microcredit Summit, at the Fourth World Conference on Women, and at the other global summits demand that we keep this as a priority.

The cornerstone of microcredit is the irrepressible desire and innate capacity of people to improve their lives, for themselves and especially for their children. Access to credit for self-employment and other financial and business services gives the poorest families the opportunity to triumph over the cruelties of extreme poverty.

The success of microcredit is best summarized by Noeleen Heyzer, Executive Director of the United Nations Development Fund for Women (UNIFEM): "Microcredit is about much more than access to money. It is about women gaining control over the means to make a living. It is about women lifting themselves out of poverty and vulnerability. It is about women achieving economic and political empowerment within their homes, their villages, their countries."
 
 

The Microcredit Summit Campaign
440 First Street, N.W., Suite 460
Washington, DC 20001
USA
Tel: +1 202 637 9600
Fax: +1 202 637 3566
Email: info@microcreditsummit.org
http://www.microcreditsummit.org

The Microcredit Summit Campaign is a Project of RESULTS Educational Fund

Appendices
 Appendix 1 --Microcredit Institutions whose figures on poorest clients as of December 31, 1999 have been verified.
     Asia
     Africa
     Latin America and Caribbean
     Total
 Verifiers --Individuals who verified Appendix 1 data
 Appendix 2a -- The largest microcredit programs in Asia that have reported the number of poorest clients reached as of December 31, 1999
 Appendix 2b -- The largest microcredit programs in Africa that have reported the number of poorest clients reached as of December 31, 1999
 Appendix 2c -- The largest microcredit programs in Latin America and Caribbean that have reported the number of poorest clients reached as of December 31, 1999
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APPENDIX 1

Microcredit Institutions whose figures on poorest* clients as of December 31, 1999 have been verified.

For the first time, the Microcredit Summit Campaign has initiated a confirmation process with the Institutional Action Plans submitted in the year 2000. The fifty largest institutions in each of the following regions -- Africa, Asia and Latin America -- were asked to provide the Campaign with donor agencies, research institutions, networks and other institutions that could corroborate their data. In the letter addressed to the potential verifiers, the Secretariat defined the process as follows: "By confirm, we mean that you have visited the program, met the senior officials, reviewed aspects of the operation, they have provided you with numbers, and you believe that the institution and the numbers listed below are reliable and credible.  While we understand that no one can provide absolute certainty, we would appreciate your participation in this process."

It must be restated that the Summit’s greatest challenge is bridging the gap between its commitment to reaching the poorest and the lack of a sufficient number of effective poverty measurements in use.  Therefore, every use of the term poorest within these appendixes should be read within the context of this dilemma.  It is anticipated that, with every successive report, the use of quality poverty measurements will increase, and therefore, so too will the quality of the data reported.

The data from 78 practitioner institutions was corroborated by at least one other organization.  These 78 institutions report reaching 9.3 million poorest at the end of 1999, or 67 percent of the total number of poorest clients reported.  80 percent of the 9.3 million poorest clients are women.

* "poorest" in developing countries refers to families who are in the bottom 50 percent of the population living below their country's poverty line.
  

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Verifiers
Individuals who have verified practitioner data found in Appendix 1. Organizations are listed for identification purposes only.