Grameen Foundation : Resource Center : Print Newsletter : Summer 2004 : Is Microfinance the Right Tool?
Reaching the Poorest: Is Microfinance the Right Tool?
Recent media coverage has highlighted the power of microfinance to combat poverty. Questions have also been raised as to whether women living in abject poverty can truly change their lives through microloans. Read on to see how Grameen Foundation USA and our partners around the world demonstrate every day that poverty-focused microfinance is making a difference.
Over the past quarter-century, Grameen-style microfinance has proven effective in the most challenging environments and in even the poorest communities. Consider these impressive documented facts:
- A study of SHARE Microfin Ltd, a GFUSA partner and the largest microfinance institution in India, showed that not only does it effectively reach the very poorest women, but that three out of four (76.8 percent) mature clients experienced a significant reduction in poverty.
- A 1998 World Bank study of incoming Grameen Bank clients--most completely landless--found that 84 percent met the World Bank’s own rigorous poverty targeting criteria. More importantly, the same study reported that, in the mid-1990s, 10,000 Grameen Bank clients were crossing the poverty line every month.
- Grameen Bank has shown that over time, microfinance can be financially sustainable. Fully self-sufficient since 1998, today Grameen Bank finances 100 percent of its loans from internal sources.
Donor funds are especially important to newer MFIs that have not reached the economy of scale of Grameen Bank--particularly those targeting the rural poor, who are more costly to reach. A recent decision by the U.S. Congress designates half of all government funding for microcredit to serve people living on less than a dollar per day. This action reflects an understanding of the critical need to focus resources where they are needed most.
While microfinance is not a panacea, it is a powerful weapon in the fight against poverty. The microfinance industry, the philanthropic community, and international financial institutions are the best partners to develop innovative ways to reach greater numbers of the world’s poor and help them escape poverty permanently.
More Information...
To learn how you can help more of the world’s poorest families gain access to small but life-changing amounts of credit, contact Dawn Suleri at dsuleri@gfusa.org or (202) 628-3560, ext. 121.
Grameen Foundation : Resource Center : Print Newsletter : Summer 2004 : Is Microfinance the Right Tool?
Grameen Foundation uses microfinance and innovative technology to fight global poverty and bring opportunities to the world's poorest people. With tiny loans and financial services, we help the poor, mostly women, start businesses and escape poverty. Our global network of 55 microfinance institution (MFI) partners including our Growth Guarantee partners has touched more than 34 million people in 24 countries. In addition, we introduced and now sustain technology initiatives (Mifos and Village Phone) in Cameroon, Kenya, Rwanda, and Uganda, bringing our total country outreach to 28.
+1-202-628-3560 www.grameenfoundation.org
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