Paper

Expanding Microcredit Outreach to Reach: The Millennium Development Goal - Some Issues for Attention

How come money is not flowing in to make the growth of outreach happen?

Although the growth of microcredit to the poor is encouraging, there are still a number of constraints to the expansion of microcredit. The author notes that donors explain that there is not capacity to build a higher outreach. On the other hand, microcredit organisations complain that they are stuck with unutilised capacity however no money, grant money or soft loan or market money is available to them. Identifies problems as:

  • Lack of initiative in creating financing institutions;
  • Absence of legal framework for creating microcredit institutions;
  • Barriers in accepting deposits;
  • Absence of regulatory framework;
  • Lack of conceptual clarity.

Proposes that the problems of lack of funds might be solved by implementing:

  • A national wholesale fund, for example PKSF in Bangladesh;
  • An international wholesale fund, such as the Grameen Trust;
  • A Build Operate Transfer approach of Grameen Bank;
  • A public deposit guarantee service.

Sees that donors have gradually become skeptical about sustainability issues, not-reaching-poorest issues, commercialisation issues and impact issues:

  • Donors give the impression of being cautious observers of microcredit, rather than its enthusiastic promoters;
  • Donors want all types of microcredit programmes to show the same result while donor advisors come from different direction of expertise and most of them do not come with any "microcredit" expertise;
  • Donors assemble everything under the sun which come in the shape of small loans, and call all of these as microfinance;
  • From a big pot, full of "microfinance" stew, donors pick up all kinds of examples to come up with all kinds of conclusions;
  • If donors can frame categorywise microcredit policies they may overcome some of their discomforts while general policy for microcredit in its wider sense, is bound to be devoid of focus and sharpness.

Concludes that:

  • The next five years will be very critical in terms of making adequate institutional, financial, and policy preparations for reaching the millennium development goal of reducing the global number of poor by half by 2015. Without preparations we will fail to achieve the goal and we do not wish to accept the option of failure;
  • Microcredit can play a vital role in attaining the millennium development goal. Information technology supported by microcredit can be a very powerful force getting half the world's poor out of poverty by 2015.

About this Publication

By Yunus, M.
Published