UN Report: Role Of Microcredit In The Eradication Of Poverty

C. Recent developments of international institutions

  1. One of the outcomes of recent discussion has indicated that a more coodinated and concerted international effort is required if microcredit is to spread and succeed on the scale that expectations now require. It is with that perspective in mind that the World Bank has led the process of international coordination primarily by establishing the Consultative Group to Assist the Poorest (CGAP), which brings together a number of western donor countries and international agencies. The group has ancillary structures which ensure that government organizations and borrowers in general are consulted.
  2. CGAP, which comprises 25 members, including United Nations bodies, is a multi-donor effort to address the problems facing microfinancing. The most important of these are lack of access to information, the measurement of loan delinquency, setting of interest rates, designing lending procedures and developing business projects. The objective of CGAP is to foster good donor practices, including performance standards.
  3. With regard to the level of funding to microcredit institutions,in its first two-and-a-half-years, CGAP provided about $18 million in grants to microfinance institutions and also committed $400 million in the past three years to microfinance activities. These are relatively modest amounts. Grants have been made directly to institutions and networks of practitioners. Eligibility criteria have included the following: (a) institutions must serve more than 3,000 very poor clients, of which at least 50 per cent must be women; (b) institutions must be operationally self-sufficient and on the path to financial self-sufficiency; and (c) institutions must be on the path to mobilizing domestic commercial resources.
  4. An important positive development from the CGAP process is that success stories and their characteristics are now much better known. To spread these best microcredit practices to different parts of the world – often under vastly varying conditions – is now the central challenge facing the international community and the developing countries.
  5. Within the international community, many United Nations organs have now started to support microcredits, especially, under the leadership of the United Nations Development Programme (UNDP). The provision of actual financial resources is rather limited; instead, United Nations bodies have emphasized capacity-building and institutional strengthening, training and consultations to spread best practices. Under the provisions of General Assembly resolution 52/194, all United Nations organs were requested to provide information on their activities, this information is contained in chapter III below.
  6. It should be borne in mind that total world ODA is diminishing, and resources for United Nations bodies are under special strain. Therefore, a better use of the available resources has become a more pressing imperative. It is important that resources are channelled to sectors that have potential, especially agriculture, infrastructure and education. It would be a pity if experimentation with new forms of development activities were to lead to a squandering of aid.