With only 10 per cent of the worlds economically active poor enjoying access to basic financial services, and governments and donors limited in the amount of money they can give, microfinance institutions are an increasingly crucial source of support for the self-employed, UN Secretary-General Kofi Annan told a regional summit on the issue Monday.
In a message to the Middle East and Africa Microcredit Summit Meeting in Amman, which runs through Wednesday, Mr. Annan said it is critical that microfinance institutions are able to mobilize resources locally to fill the funding gap.
– At the same time, we need to ensure that such institutions apply sound business practices, maintain operational sustainability, adhere to good governance and clear and transparent reporting, and keep in sight the overall goal of serving low-income clients, including the poorest of the poor, he said.
In most developing countries, banks and other mainstream financial bodies are reluctant to accept poor clients as customers because they are perceived as less profitable and more risky.
Of the estimated 1 billion poor people classed as economically active, only about 10 per cent have access to basic services, Mr. Annan said.
But he said that microcredit has been “one of the success stories of the past decade”. Microcredit is often defined as any programme extending small loans or other financial services such as savings to poor people for self-employment projects that generate income.
The Secretary-General added that “we have seen that, under the right conditions, access to financial services enables poor people to increase their incomes, build assets and reduce their vulnerability to crises.” It has also been credited with improvements in education, health, nutrition and womens rights.
Noting that 2005 will be the International Year of Microcredit, Mr. Annan said many microfinance institutions in the Middle East and Africa will remain dependent on external funding.
Mr. Annans message was delivered on his behalf by Mervat Tallawy, Executive Secretary of the UN Economic and Social Commission for Western Asia.
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