There are two new Economist articles that highlight the impact and consequence of micro-credit, or more generally micro finance institutions, that in Bangladesh moved millions of families away from the gaping jaws of extreme poverty, toward a vision of more sustainable, capability oriented lives.
The first article deals with innovations that have empowered women. Though the article is principally about a new paper examining 8 innovations that have improved women’s lives the world over, readers of this blog might take notice of things that often go unremarked.
The Economist declares: “Two recent innovations have garnered a lot of attention for the way they empower women. One is microcredit, a system of lending to very poor people, the majority of whom are female microentrepreneurs who are thus helped to climb out of poverty. The other is the mobile phone, which among other things has led to the emergence of an army of “telephone ladies” in countries such as Bangladesh, who earn a decent living by buying a phone and renting it out to other villagers.” This is the ticket out from extreme poverty for many people, and though it might not make the evening news, attention must be paid.
The second article, published by the Economist deals with the feasibility of establishing micro-savings plans as part of the broader move to build microfinance capacity in many less developed countries.
Again, the Economist:
“That [the extreme poor, those who live on $2 a day] can borrow at all is partly due to the rapid growth of microfinance, which specialises in lending small amounts to poor people. Several big microfinance institutions (MFIs) also offer savings accounts: Grameen Bank in Bangladesh is a prominent example. But the industry remains dominated by credit, and the ability to save through an MFI is often linked to customers’ willingness to borrow from it. Of 166 MFIs surveyed in 2009 by the Microfinance Information Exchange, a think-tank, all offered credit but only 27% offered savings products. Advocates of a greater variety of financial services for the poor argue for more balance.”
“This may be on the horizon. More MFIs are becoming interested in the potential of savings, thanks partly to the global financial crisis. A majority of more than 400 MFI managers surveyed last March by the Consultative Group to Assist the Poor (CGAP), a microfinance group based at the World Bank, said that they had faced liquidity problems during the crisis (see chart). This, together with rising financing costs and exchange-rate fluctuations for those MFIs that rely on external finance, has prompted many “credit-only” MFIs to warm to the idea of funding at least part of their lending activity using local savings.”
The discussion has only just begun.
