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Editorial
01/2006 |
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Human right to financial services
There will probably never again be an International Year of Microcredit, after the UN declared 2005 as such. Of course, such themes sometimes go by with hardly a trace. This time, however, the international community is well-prepared for an era of broader-based microfinance.
Microcredit organisations have come a long way. In the 1970s, Muhammad Yunus, the man who says that access to credit is a fundamental human right, founded the by now world-famous Grameen Bank in Bangladesh. Some experts, however, still fail to notice to what extent this financial institution is also engaged in social work. Yes, Grameen does offer modest loans to small groups of poor village women for income-generating ventures. But it is also involved in remodelling its clients’ view of the world. It organises and disciplines groups, integrating them into larger centres, which do not only support and encourage, but also monitor and control one another. Grameen offers training courses and promotes literacy. The bank (along with similar initiatives) is propagating business sense in a new female public in rural Bangladesh, a predominantly Muslim country.
This spectacular achievement, however, overshadows other success stories. Other organisations have also had positive experiences with microloans. Networks like ProCredit, Finca and Acción are internationally active – and their social work ambitions vary strongly. ProCredit, for instance, does not work with groups at all. Nor does it target the poorest of the poor, but rather entrepreneurial-minded people from low income strata. The difference between support for small businesses and elementary poverty alleviation may prompt heated debate. But in practice the boundaries are blurred – and from an economics point of view the distinction does not matter much. Small businesses create jobs and income where they are needed most. Microinvestment by marginalised people, in turn, is futile if it does not become sustainable commercially.
Loans, meanwhile, are not the only service poor people deserve. They also need a safe place for their savings – however minimal these may be. Cashless transactions protect them from robbery and theft. In our age of migration, international transfers are important, especially so for disadvantaged regions. Moreover, insurance companies’ initial experience with microcontracts also seems quite promising.
The widespread view of financial sectors being unaffordable in poor regions is based on a double misconception. On the one hand, services which are not lucrative from a multinational’s point of view may nonetheless make business sense – to providers and customers. On the other hand, and more importantly, economic success results from broad-based financial infrastructures – not the other way around. In Germany and other prosperous countries, universal financial systems were in place long before we began enjoying today’s high levels of consumption. Municipal savings banks and cooperative financial institutions offered services in Germany in the 19th century.
The trend towards microfinance in all its forms deserves wide support – and does not only concern the financial sector. Governments must provide the appropriate regulations. Media and schools should raise awareness of essential services (something which, in the eyes of many experts, is not sufficiently done even in Germany). The goal should be wide access to respectable financial institutions for all, regardless of how modest their circumstances – definitely in the sense of a human right.
Dr. Hans Dembowski
Editor in Chief of D+C Development and Cooperation/E+Z Entwicklung und Zusammenarbeit
euz.editor@fsd.de
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