Development

The Microcredit Summit: NGOs host a world-class meeting

In Brief: 

The European Bahá'í Business Forum To an unprecedented degree at the international level, NGOs were setting the agenda, choosing the issues, drafting the documents and bringing together representatives from the highest levels of society - from heads of state to corporate executives to UN agency directors. 

WASHINGTON - With some 17 dignitaries from around the world waiting to speak, it was not surprising that Sam Daley-Harris became concerned when Ugandan President Yoweri Kakuguta Museveni started running beyond his allotted time.

So Mr. Daley-Harris, as director of the Microcredit Summit, did the sort of thing that any experienced NGO meeting chairman might be expected to do: he passed a note to President Museveni indicating his ten minutes had run out.

And President Museveni did what many heads of state might be expected to do: he kept on talking.

"You don't invite a man from 10,000 miles away just to come and sit down without speaking," joked President Museveni.

Though minor, the incident reflects the unusual dynamics at the Summit, which was held here from 2-4 February.

Attended by more than 2,200 people from some 112 countries, the conference had many of the earmarks of a United Nations summit meeting. It tackled a major theme on a global scale, had a carefully negotiated plan of action, saw the active involvement of UN agencies, was attended by heads of state and government, and provided a forum for representatives of non-governmental organizations (NGOs).

Yet the Microcredit Summit was not organized by the United Nations - it was instead organized by an ad hoc coalition of NGOs. And in that fact, said many who were involved in the Summit, lay an historic significance.

To an unprecedented degree at the international level, NGOs were setting the agenda, choosing the issues, drafting the documents and bringing together representatives from the highest levels of society - from heads of state to corporate executives to UN agency directors. The significance was clear to those who see the rising influence of NGOs and civil society as part of a major international trend, one which stretches back through the recent UN-sponsored global summits and promises to extend on into the future.

"One of the most exciting developments, in my opinion, in the process of moving microcredit activities onto the international stage was the evolution of the role of civil society," said Juan Somavia, Chile's Ambassador to the United Nations and the chairman of the 1995 World Summit for Social Development.

"You have been able to bring together from the civil society, the governments, the relevant actors throughout, those that can make the Microcredit Summit a reality," he added. "This is the sort of activity that civil society has to continue."

Goal of the Summit

The stated goal of the Summit was "to launch a global movement to reach 100 million of the world's poorest families, especially the women of those families, with credit for self-employment by 2005." Summit organizers believe that microcredit, the practice of providing extremely small loans to people with little or no collateral, offers a breakthrough innovation for economic development.

The main activity of the Summit was to bring together representatives from major international actors that can boost such a movement, such as UN development agencies, donor organizations, heads of state, parliamentarian groups, NGOs, and educational institutions, as well as commercial banks and corporations - and to get them all to make commitments to achieving the Summit's goal.

To this end, a committee composed principally of NGO representatives who have long been involved in managing microcredit programs worked for two-and-a-half years to organize the Summit, a process to which they brought their own particular imprint.

For example, instead of negotiating the conference's "Declaration and Plan of Action" at the Summit itself, the document was worked out via a series of mailings to microcredit specialists around the world, as well as at several preparatory meetings. All totaled, more than 5,000 individuals and organizations were involved, said Mr. Daley-Harris, founder of The Results Educational Fund, which played a leading role in sponsoring and organizing the Summit.

And instead of organizing along thematic issues into committees or caucuses, as has been the practice at other recent UN Summits, participants were organized into "councils," with each organization or agency being assigned by the category of its work. UN agencies, for example, were grouped into one council; banks and commercial finance institutions into another. The list of councils included "foundations and philanthropists," "religious institutions," "NGOs" and even "domestic government agencies."

Most significantly, perhaps, organizers succeeded to an impressive degree at bringing top level representatives from each grouping to the Summit.

Five heads of state or government attended and spoke, including President Museveni of Uganda, Prime Minister Sheikh Hasina of Bangladesh, President Alpha Konare of Mali, President Alberto Fujimori of Peru, and Prime Minister Pascoal Mocumbi of Mozambique. Also present were two royals, Queen Sofia of Spain and Queen Fabiola of Belgium, and three first ladies, Hillary Clinton of the United States, Siti Hasmah of Malaysia, and Ana Paula dos Santos of Angola.

In attendance, as well, were government ministers and the heads of the following UN and international agencies: the World Bank, the United Nations Educational, Scientific, and Cultural Organization (UNESCO), the United Nations Development Programme (UNDP), the United Nations Population Fund (UNPF), and the United Nations Children's Fund (UNICEF).

In virtually every case, the leaders who attended the Summit voiced strong support for its goals and/or announced new programs to support microcredit efforts in their country, region, agency or company.

President Fujimori, for example, announced the creation of a new credit and financial institution, MIBANCO, "especially geared at supporting and promoting growth for low income entrepreneurs" which he said will "dramatically" boost microcredit in Peru.

"Using microcredit as a lever, I am persuaded women in Peru and in poor countries around the world can make a substantial contribution to create wealth and jobs," said President Fujimori.

James D. Wolfensohn, president of the World Bank, which has in the past been criticized for focusing too much on large-scale projects, said the Bank would do more with the microcredit movement. "We are part of the effort to bring microcredit to 100 million families," said Mr. Wolfensohn.

The Successes of Microcredit

According to Mr. Daley-Harris, NGOs sponsored the Summit because they felt recent United Nations conferences had not done enough to call attention to the effectiveness of microfinance as a tool for alleviating poverty. "If any of the preceding summits had emerged with one compelling, measurable goal in the area of microcredit, we would not have attempted to organize this Summit," said Mr. Daley-Harris. "Another way of saying it is that we, as NGOs, said to the UN, 'you missed a point' and they agreed."

The most successful programs see repayment rates in the 90 percent range, and some report repayment rates of up to 98 percent. "The first Microcredit Summit announces to the world a discovery of enormous power," said Michael Chu, president of ACCION International, a major microcredit NGO. "The seed of sustainable development and the road out of poverty - so elusive despite enormous efforts - lies not in massive public handouts but in tapping the wealth found even in the most economically fragile sectors of our societies: the self-initiative of the world's poor men and women."

Although microcredit programs vary by region, one of the key innovations is organization of clients into small "solidarity groups" in which members pledge to satisfy each other's debt, providing a form of "social capital" that helps ensure that loans are repaid. NGOs have played a key role in helping people to organize such groups, and in administering such loans, which many banks have believed were too small to be profitable.

"Ten years ago, there were virtually no loans made by microfinance institutions," said Nancy Barry, president of Women's World Banking and a member of the Summit's executive committee. "Today there are 13 million. All of that is because of NGOs and grassroots organizations."

Despite the praise and support for microcredit and its practitioners, a number of people cautioned against imagining that such programs are the only solution to poverty worldwide. "Microfinance is an efficient instrument, but an instrument that can work only when integrated into other development actions," said Paul Grozen, executive secretary of the United Nations Capital Development Fund.

Others also cautioned against assuming that simply providing more funds to microcredit programs will succeed in reaching the Summit's goals. "It is not the lack of capital but rather the lack of human and institutional capacity which constrains microcredit programs," said James Gustave Speth, administrator of UNDP. In recognition of that, his agency announced a $41 million program to build up the capacity of NGOs to deliver microcredit - a program that will seek as a central element to work directly with NGOs instead of through governments, which has been the main method of operation for UNDP in the past.

Summit organizers are hopeful that the establishment of the various "Councils," as well as pledges by participants to report back on the results of their plans and efforts to do more with microcredit, will create an on-going movement that can lead to broad-based change in the way economic development is practiced.

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