Meeting the Challenge of Reaching the Poorest

1999 Microcredit Summit Campaign Report

Sarah Doe of Liberia fled to Côte d’Ivoire due to the war. Her husband died in the war leaving her to fend for their ten children on her own. She started with a $16 loan to establish her business selling doughnuts. Her business has grown with hard work and additional loans. She has been able to send four of her children to school and establish a savings account. Ms. Doe plans to move back to Liberia once the house that she has started building in Pleebo, is completed.
-- IRC-SEAD success story.

Introduction

On February 2-4, 1997 more than 2,900 people representing 1,500 institutions from 137 countries gathered at the Microcredit Summit in Washington, D.C. Together they launched a nine-year campaign 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 the year 2005.

On the fourth anniversary of the United Nations Fourth World Conference on Women held in Beijing, the Microcredit Summit Campaign looks at its contribution to that effort. In China, delegates resolved that action should be taken to provide women in poverty with access to savings and credit mechanisms and institutions as part of an overall commitment to improve the status of women worldwide.

The most recent survey of microfinance programs involved in this global campaign reveals that of the 925 institutions that reported, those members are reaching 12.6 million poorest clients with credit for self-employment and other financial and business services. Seventy-two percent of all poorest clients, or 9.1 million, are reached by just 34 programs. Seventy-six percent of their clients are women (see annex 1). The survey also reveals that among the most important, immediate challenges facing the global campaign is the development of simple, cost-effective measurements for determining the poverty level of microfinance clients.

At the Summit, nine central themes were extracted from the 55-page Declaration and Plan of Action and enunciated at the Summit Council meetings. These themes addressed a wide variety of issues, from underscoring that microcredit is not a panacea but part of a larger movement working to alleviate poverty, to warning against an indiscriminate flow of resources to programs that are not ready for the next level of growth. The essence of the Microcredit Summit, however, can be summarized in the following four core themes.

1. Reaching the Poorest: The Summit recognizes that the field of microfinance includes all those institutions providing financial and other services to constituencies that are overlooked by the traditional banking sector. The goal of the Summit, however, focuses on outreach to 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 the poverty line. Within industrialized countries the Summit is focused on all of those living below the poverty line.

2. Reaching Women: Of the 1.5 billion people living on under US$1 per day, 1 billion of them are 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. At the same time, through earning an income women achieve a higher status in their homes.

3. Building Financially Self-Sufficient Institutions: Experience has shown that microfinance programs in developing countries can structure their interest rates and fees to eventually cover their operating and financial costs. The Declaration and Plan of Action emphasizes the importance of programs in developing countries reaching financial self-sufficiency. Though 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 Positive 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 measurable, positive impact on the lives of the very poor families.

This report is based upon results from a survey undertaken by the Microcredit Summit Secretariat. As of August 1, 1999, 1,557 microcredit practitioner institutions worldwide had joined the Microcredit Summit Council of Practitioners. In doing so, they embraced the Summit’s goal and agreed to formulate a plan of action within one year of joining the council outlining how their institution would contribute to its achievement. Practitioners reported the number of clients they were currently serving as well as the number of clients they planned to reach in 2005.

As this survey is dependent on self-reported data, the Summit can make no assurance as to the accuracy of the findings. Throughout this report, the Summit includes information on how the Summit is seeking to address issues and concerns raised by these findings.

The Data

As of June 1999, 925 established microcredit practitioners had responded. These programs together report reaching 22,185,898 current clients. Most programs also reported the percentage of their clients who were in the bottom 50 percent of the population living below their country’s poverty line when they started with the program. According to the information these programs reported, they are currently serving 12,561,975 of the poorest families. The figures that follow are from 1999 and the 1998 report.

Number of programs reporting and year	Total number of clients reported	Number of clients, counted as “poorest,” reported	Projected number of clients in 2005	Projected number of ”poorest” clients in 2005
622 programs reporting in 1998	14,808,871	8,127,504	55,224,473	32,944,552
925 programs reporting in 1999	22,185,898	12,561,975	77,130,000	39,217,195

It should be stressed that these numbers do 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 unable to determine how many clients are participating in more than one program, however, in most cases of practitioner network institutions, the Summit used data from individual programs rather than totals from the networks in order to avoid double-counting. In addition, several practitioners do not give a verifiable identification of how many of their borrowers are among the poorest. It should be noted that the absence of data on how many clients are among the poorest need not be an indication that the program does not intend to serve this clientele. Rather the absence of data points to one of the central challenges facing this global campaign in its first years–the lack of simple, cost-effective, reliable measurements to identify the poorest families beyond general indicators such as the poverty level of a country or the size of loans.

• To fill this gap, the Microcredit Summit established the Poverty Measurement Discussion Group to help identify simple, reliable, cost-effective poverty measurements applicable in different regions of the world. By collecting and disseminating this information, the Summit Campaign intends to support microfinance practitioners world-wide in reaching consensus and adopting the most effective techniques to assist them in identifying and reaching the poorest families. The Microcredit Summit Campaign Executive Committee recently approved the creation of a Microcredit Summit Poverty Measurement Tool Kit (PMTK). The first two measurements to be included in the Summit’s PMTK are the CASHPOR House Index for use in rural Asia, and the Small Enterprise Foundation’s 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. Institutions using one or more of the tools from the tool kit also gain the advantage of being able to provide more accurate information on their clients. 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. The first, second, and third papers of the Poverty Measurement Discussion Group can be found at http://www.microcreditsummit.org/discussion.htm or may be requested from the Microcredit Summit Secretariat office. The Summit also commissioned a paper for the 1999 meeting of Councils that deals with this issue, entitled “Overcoming the Obstacles of Identifying the Poorest Families.” This paper is available at http://www.microcreditsummit.org/papers.htm.

By 2005, the 925 established programs plan to be serving over 39 million families who were very poor when they started with the program. This number does not include many hundreds - if not thousands - of practitioner institutions that have not yet joined the campaign. Experience tells us that while some of these programs may fail or fall short of their projected targets, some programs will exceed their targets, and that new programs will spring up in the years to come.

Analysis By Region

Continent	Number of programs reporting	Number of current clients reported	Number of current clients “poorest” reported1	Number of projected clients reported for 2005	Number of projected clients “poorest” reported 20051
Africa	377	2,889,576	2,044,359	22,508,960	14,232,620
Latin America & Caribbean	141	1,947,082	774,927	7,372,327	3,774,045
Asia	329	16,874,645	9,518,596	45,409,279	20,582,581
Middle East	14	41,208	16,774	483,658	115,800
Developing World Totals	861	21,752,511	12,354,656	75,774,224	38,705,046
North America	30	42,992	24,844	268,251	122,252
Europe & NIS	34	390,395	182,475	1,087,525	389,897
Global Totals	925	22,185,898	12,561,975	77,130,000	39,217,195

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.

The field is still dominated by large programs in Asia, with five of the ten largest programs in Bangladesh.

• 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 welcome, the Summit is more concerned to help these new and expanding programs focus on reaching the poorest, especially women; develop self-sufficient institutions; and adhere to the principles of best practices.

Conclusion

The campaign survey shows growth in the number of clients being served by microcredit programs. Determining whether this growth in the number of programs and borrowers represents an increase in the number of the poorest families being served is among the most important challenges facing the global campaign. The development of simple, cost-effective measurements for determining the poverty-level of microfinance clients will therefore continue to be addressed by the Microcredit Summit through the Poverty Measurement Discussion Group and the Poverty Measurement Tool Kit.

One of the functions of the Microcredit Summit Campaign is to help existing practitioners share experience and knowledge with each other, and with new and fledgling programs around the world. Through the Summit’s newsletter Countdown 2005, the annual Meeting of Councils, the website, and active contact with practitioners worldwide, the Summit Campaign disseminates information on best practices.

It is important to recognize that the cornerstone of microcredit is the irrepressible desire and innate capacity of people to improve their situation and to succeed, 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 achieve their own triumph over the cruelties of extreme poverty. The Microcredit Summit chose to focus on the poorest people, especially women, because experience has shown that they are most likely to be left out of poverty eradication programs.

The success of microcredit is expressed in the words of Melchora Jihuallanca, a borrower from FONDECAP in Huallatayre, Peru: “I don't know how to read or write, but I have a head with which to think. Before the credit, I was just in my house, taking care of my children and my animals. I did not know anything about business and I only looked at my husband's face. My children did not go to school because there was not enough money. Now that I have started to take credit with FONDECAP, I have learned how to run my own business. My husband respects me and now I talk with him. I count on my money to send my children to school."

Further information on the Microcredit Summit is available by writing to:
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

Data compiled by Microcredit Summit research staff:
Anna Awimbo, Robert Gailey, Lisa Jane Kuhn, Richard Randriamandrato  

ANNEX 1: Percentage of Women Being Reached by the 34 Largest Programs Reporting Poorest Clients

Nine hundred twenty-five programs reported to the Microcredit Summit Campaign. The following data was compiled from the 34 programs reporting the largest number of poorest clients. Programs which did not track and report the number of their clients who were among the poorest are not included in this list. The Microcredit Summit Campaign defines “poorest” as those in developing countries in the bottom half of those living below their nation’s poverty line when they entered the program. The 9.1 million poorest clients of these 34 programs represent 72 percent of the total poorest borrowers reported to the Campaign (72 percent of 12.6 million). Seventy-six percent of the borrowers in the following 34 programs are women.

Institution	Total number of poorest borrowers reported 1998	Total number of poorest women reported 1998	Percent poorest women reported 1998	Total poorest borrowers 1997	Total number poorest women 1997	Growth of women borrowers
Grameen Bank, Bangladesh	2,400,000	2,280,000	95%	2,270,000	2,156,500	123,500
Association of Asian Confederation of Credit Unions, Thailand	1,699,292	900,625	53%	1,425,262	726,883	173,742
BRAC, Bangladesh	1,040,000	1,040,000	100%	900,000	900,000	140,000
Assoc. for Social Advancement (ASA), Bangladesh	720,208	669,793	93%	571,859	548,985	120,808
Proshika Manobik Unnayan Kendra, Bangladesh	640,000	358,400	56%	420,000	231,000	127,400
Caribbean Confederation of Credit Unions	400,000	260,000	65%	370,000	222,000	38,000
Agricultural Development Bank, Nepal	218,153	59,992	27.5%	200,183	50,045	9,947
Caritas, Bangladesh	207,473	130,708	63%	125,250	80,160	50,548
Dedebit Credit and Savings Institution, Ethiopia	168,954	64,202	38%	76,257	29,740	34,462
Credit Mutuel, France (Worldwide)	162,271	19,448	12%	106,884	11,757	7,691
Working Women’s Forum, India	162,000	162,000	100%	148,700	148,700	13,300
Swanirvar Bangladesh	137,490	103,118	75%	110,800	80,884	22,234
Country Women’s Association of Nigeria	126,000	113,400	90%	90,000	81,000	32,400
People’s Bank of Nigeria	108,000	70,200	65%	92,500	64,750	5,450
Amhara Credit and Saving Institution, Ethiopia	94,004	47,002	50%	46,647	23,323	23,679
Fight Against Poverty Organisation, Nigeria	75,000	74,250	99%	35,500	35,145	39,105
Kafo Jiginew, Mali	67,871	67,871	100%	56,899	56,899	10,972
South East Sadish Krishi Samabay Samittee Ltd., Bangladesh	62,000	55,800	90%	45,000	40,500	15,300
FINCA International, US (Worldwide)	61,480	57,791	94%	65,000	62,400	(4,609)
Amanah Ikhtiar Malaysia	56,087	56,087	100%	55,666	55,666	421
Uganda Cooperative Savings and Credit Union, Ltd.	51,935	13,347	26%	52,097	13,024	323
Thengamara Mohila Sabuj Sangha, Bangladesh	45,000	45,000	100%	20,542	20,542	24,458
National Bank of Cambodia	40,570	32,450	80%	26,160	20,930	11,520
BURO, Tangail, Bangladesh	39,000	37,050	95%	32,413	30,792	6,258
Association for Rural Development of Poor Areas in Sichuan, P.R. China	37,800	20,790	55%	11,827	9,580	11,210
Sri Lanka Business Development Center	37,500	22,500	60%	22,500	13,500	9,000
IRED, Zimbabwe	35,000	28,000	80%	30,000	24,000	4,000
Alliance of Philippine Partners in Enterprise Development	31,193	30,257	97%	23,017	21,867	8390
Federation des Caisses Populaires du Burkina Faso	30,806	29,266	95%	12,095	12,095	17,171
Heed, Bangladesh	30,630	22,972	75%	25,862	18,103	4,869
Microcredito Santa Fe de Guanajuato, Mexico	27,817	24,200	87%	11,517	10,596	13,604
ACLEDA, Cambodia	25,964	25,704	99%	9,099	8,917	16,787
Nigerian Agricultural and Cooperative Bank	24,780	4,460	18%	27,777	3,888	572
Fundacion para la Promocion y Desarollo de la Microempresa (PRODEM), Bolivia	24,000	15,600	65%	21,000	14,070	1,530
TOTAL	9,088,278	6,942,283	76%	7,538,313	5,828,241	1,114,042

 

Read the 1998 Microcredit Summit Campaign Report.