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Annette Brooke (Mid-Dorset and North Poole) (LD): I congratulate the hon. Member for Cities of London and Westminster (Mr. Field) on securing the debate. It is some time since we had an informed debate on microfinance, so I am delighted that we have the opportunity today. I apologise to all hon. Members who are present, because I must be at the first sitting of a Bill Committee and must leave early.
It is important, as the hon. Gentleman outlined, to consider the full range of what microfinance involves. We think about it as the provision of financial services to those who are traditionally excluded, but it is important to remember that it goes far further than providing small loans to set up a business. It is important for access to savings accounts and insurance, in particular. As the hon. Gentleman said, it is important to think about microcredit in this country, as well as its role as an international development tool. Clearly it has great scope, particularly in marginalised communities such as the one that I mentioned in an intervention. I am sure that especially in the current economic climate we want to do as much as we can to support our local credit unions.
Much of my work on microcredit has involved observing overseas projects. There is a self-help aspect to it-it is bottom-up. It is not about someone coming along and telling people how to do things, but involves employing local people in local organisations. It is about development at a rate that is compatible with local cultures and what the people choose to do with their lives. I agree that evaluation throughout is important and it can never be said that every project is a huge success; but we need to consider all the different dimensions. I want briefly to touch on some personal experiences, to bring out some general points.
Several years ago I was very impressed by the work that I saw in Kibera in Nairobi. It was amazing to people who visited it. People were lifting themselves out of extreme poverty and terrible living conditions. The fragility of that, however, was shown after the elections in Kenya, when there were riots in Kibera. There were many people with debts, whose businesses were smashed. We can never stand back, thinking that there is the power to make things sustainable in such extreme conditions.
I visited a project in Malawi with Opportunity International. The Opportunity International banks in Malawi are primarily savings institutions. They have a savings to loan ratio almost the opposite of ours, and many of us might feel more comfortable with that. The provision of that savings facility is all-important. The bank provides a smartcard, with an identifier using fingerprints to access money from machines and deposit it in mobile vans in the villages. The strength of the arrangement is that the people involved, who are primarily women, can get their money safely into the bank as soon as possible. That is crucial to enable them to move forward and protect their money to use on the things they want it for. That is an interesting savings model. Loans are made, but the model is primarily about savings.
I was fortunate enough to visit some projects that came from both the Grameen bank and BRAC in Bangladesh where another aspect of microfinance was demonstrated. We went to a village and heard how a group of women had used their money. The loans were predominantly to buy goats and animals. It could be argued that the basic loans had not led to any further growth, beyond survival and life being made a little more comfortable. However, one of the women introduced us to her son who had just completed his master's degree. That was one of the add-ons that are such an important aspect of microfinance. Because of the predominance of women in using it, there is a tendency
for it to be used to promote the family's future. It is difficult to measure that as an impact of microfinance, but it seems to me to be one of the most sustainable aspects of it. It tends very much towards the improvement of educational opportunities for the next generation, and beyond. There are so many wonderful stories about that.
Mr. Mark Field: The hon. Lady reminds me of a lasting thought about my trip to Bangladesh at the beginning of January. I noted a sense of positivity among middle-aged Bangladeshis, as the prospects for their children and grandchildren were going to be markedly better than theirs had been. The hon. Lady rightly says that elements of microfinance and of a growing economy are central to the Bangladeshis' sense of optimism for the future of their country.
I now refer to a totally different situation. I have visited Chennai, an area affected by the 2004 tsunami, to see some microfinance projects there. Rebuilding was not complete, but it was well under way. That was of great interest, as it showed the enormous importance of microfinance as part of what I would call a regeneration project. What I witnessed there was a good example of the empowerment of women through microfinance.
In the area that I visited, the male occupation was predominantly fishing. However, there were problems with alcoholism and domestic violence. The women in the microfinance group explained that when they identified someone, or if somebody came to them to say that they were experiencing domestic violence, the women as a group would challenge the perpetrator. That was an amazing example of the empowerment of females.
The hon. Lady says that she has run around the world, but she has not touched on Afghanistan. She may be aware that 65 per cent. of the £4 million loans given for microfinance use over the past five years in Afghanistan went to women, to empower them. Does she think that that was a more effective use of our taxpayers' money than the £4 billion spent over that time on the war?
I shall not be drawn into that. The important point is that although microfinance is never the only tool it makes an important contribution. I am aware of the microfinance projects in Afghanistan. Indeed, I have spoken to the Bangladesh rural advancement committee-BRAC. Straying slightly, it is staggering that such a country should have produced two enormous NGOs. BRAC, in particular, has reached out worldwide. I am sure that other organisations are operating there, but I am well aware of the work that they are doing. As for the social issues in Afghanistan, most of us believe
that it is not only the fighting that needs to be tackled but the social structures, and microfinance does indeed have a role.
I have touched indirectly on the millennium development goals, which include alleviating extreme poverty and everyone having access to primary education. On the latter, where microfinance is operating, it is going much further up the scale than primary education. For example, the Grameen bank is giving support for children to go to secondary school, and members of the bank are able to access loans to send their children to university. It is absolutely incredible. As for the health goal, most of the projects that I have seen involve a lot of health education; they are running with support-and obviously the empowerment of women.
We often say that microfinance is targeted particularly at women. Of course, there are men who benefit, and I do not wish to exclude them, but the fact is that 83 per cent. or more of clients are women. If there is something that women can do, they can quickly get direct benefits.
As I said, evaluation and capacity building is all important. I have seen many projects that I thought would provide no further movement up the scale for the individual. However, as in the examples given by the hon. Member for Cities of London and Westminster, I have also seen projects that are at the point of employing 40 or 60 people. The range is extreme. Then, of course, some clients move on to owning umpteen businesses and become very entrepreneurial.
We have to appreciate that there is a big range, but for those whose businesses are not going to expand greatly we should look at the wider education and health benefits when evaluating projects. Of course, we must ensure that funds are used as efficiently as possible, and learn from good examples. It is interesting to note how similar projects can be in different continents, but we must reflect on the differences. That, however, is a separate question.
I was pleased to see that the multi-donor facility for Africa has been set up. I keep asking about it because it is important that we consider the social impact; we need a strong set of social goals and a robust project design. The fund must build in safeguards and systems to promote appropriate micro-models within the structure of the fund. That is important, and the all-party group on microfinance is most interested in pursuing the future of the fund there. That is particularly appropriate for Africa; although there are some amazing examples of microfinance, we are not breaking in percentage-wise given the overall situation there.
Finally-this was meant to be a brief contribution-the all-party group is taking a particular interest in the wider issue of micro-insurance. We have always been keen on insuring for weddings, funerals and other events, but we need to consider micro-insurance on the larger scale, as part of our adaptation to climate change. It is a really important future agenda. We have raised questions with the Minister before, but it would be interesting to have an update on his view of DFID's position on the matter. Clearly, we cannot predict natural disasters, nor where or when climate change will have an impact. Having an international fund that ties in with micro-insurance would be of enormous benefit.
A lot of work needs to be done. When in Africa, I heard that as many weather stations as possible are needed in order to track what is happening to the
climate there. Proof will be needed in order claim against the fund. The country is working with farmers to plot variations in climate-and looking to farmers to plan their payments. Farmers in Africa often sell their produce in advance at a low price. That is obviously devastating for them, as they never escape from the trap, but by using the financial system they could even out their incomes and outgoings in a rational way.
A lot of groundwork is needed, particularly with agriculture, working with farmers not only in Africa but globally. Supporting micro-insurance in countries that may be particularly affected by climate change is really important.
Mr. Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD): I am delighted to follow my hon. Friend the Member for Mid-Dorset and North Poole (Annette Brooke). Moreover, I wish to congratulate the hon. Member for Cities of London and Westminster (Mr. Field) on securing this debate and on introducing it in such a comprehensive and measured way. He is right to address the debate that exists in the country about why we contribute so much to international development-I know that some argue that we are not doing enough, but that is part of the wider debate. I was pleased, too, to hear him explore the impact that microfinance can have in this country. The hon. Gentleman raised some broader points about international development, including this poor-countries-versus-poor-people argument about where we should target our assistance, particularly in the context of India and China. I appreciate that it is legitimate to explore such an area in the widest terms, but if we use, for example, the poverty of the country as a whole, we can quickly find other reasons, such as human rights records and behavioural patterns of Governments, to remove such countries from the equation as far as international development is concerned. We should therefore concentrate on the alleviation of poverty for the people rather than focusing on the country exclusively. In countries such as China, though, we should consider what the Department for International Development is doing, because important technical assistance work on climate change is under way. It is a two-way street in which we are learning from them and they are learning from us. Although we need to critically evaluate such important work, we should also continue to support it.
The financial crisis to which the hon. Member for Cities of London and Westminster referred-he also mentioned it in his helpful article on his website-has been truly awful, and we have seen it at first hand in our own constituencies. The impact on the developing world, however, has been stark. The World Bank estimates that, as a result of the credit crunch, the finance gap for 2009 is around $635 billion, some $40 billion of which is in Africa. The priority that has been given to saving the western banking system has meant that Africa and parts of Asia have been left to fend for themselves. For example, 82 per cent. of the International Monetary Fund's emergency resources has gone to European countries, and only 1.6 per cent. has been allocated to African countries.
Any debate on development has to be seen in the context of the dreadful events that occurred in Haiti a
fortnight ago. It is a truly shocking catastrophe and highlights the need for urgent humanitarian assistance, which must be backed up in the long term by really serious development attention. Many people have been talking about getting Haiti back on its feet, only for Paul Collier to pull us up short and point out that it was never on its feet in the first place. I hope that we will be debating Haiti's needs before long. Few could argue with the premise that it will need direct development assistance on a large scale for many years to come, and it is not alone in that.
In whatever part of the developing world we focus our attention on, the demands for development assistance are huge. Alongside the many channels of direct aid, which we debate and scrutinise in this House, we must not forget the importance of wealth creation as a key way to alleviate poverty. In that respect, microfinance plays an important part, which has been recognised by policy makers on the international stage for a long time. In 2005, the G8 at Gleneagles stated:
"African countries need to build a much stronger investment climate: we will continue to help them do so through the promotion of a stable, efficient and harmonised legal business framework...and increased access to finance including strong support for the development of micro-finance in Africa."
The DFID White Paper committed the UK to support the creation of the new multi-donor facility, to which my hon. Friend referred, which has a goal of delivering microfinance to an additional 10 million clients over five years. Last year, DFID provided £250,000 towards the Consultative Group to Assist the Poor, which is a multi-donor partnership that works to expand access to finance and that monitors the success of microfinance projects worldwide. That is important work, which we support.
Today, the UK development finance institution, CDC, announced that it is to invest an additional $10 million in the ShoreCap II microfinance fund. Neatly timed to coincide with this debate, the CDC announcement reminds us that 160 million people are supported through microfinance institutions, and that 3 billion people across the world remain unbanked and without proper access to financial institutions and the products that they offer. The scale, therefore, is vast and it is a chasm that we would do well to cross.
Boosting the proportion of our official development assistance that is dedicated to microfinance programmes will barely make up the substantial gap in investment that has emerged as a result of the current economic crisis. However, it is important to ensure that those at the bottom of the pile across the world will be in a position to join in the recovery.
As others have already said, the development benefits from microfinance touch on not only poverty and hunger reduction, but a number of the millennium development goals, particularly for women. A whole body of research suggests that women's participation in microfinance programmes has helped them to break free of traditional gender roles and contribute to their local communities and families. In Nepal, for example, a local women's empowerment programme found that more than two-thirds of those participating were making decisions on buying and selling property, the education of their families and negotiating marriages. All those tasks were traditionally performed by the men in the community.
Between 2002 and 2009, DFID invested more than £40 million in microfinance in Afghanistan, more than 60 per cent. of which went to women. Other benefits have been seen in areas such as child mortality. A Ghanaian study showed that "Freedom from Hunger" clients had better breastfeeding practices and that their one-year-old children were of a healthier weight and height than non-client children.
In 2009, there were more than 3,500 microfinance organisations in the world and significantly more than 50 per cent. of their borrowers were women. According to RESULTS UK, half a billion people are now involved in microfinance, which is indicative of the success of the movement globally. However, there are some issues about microfinance that must be addressed. The amount that is being invested in microfinance institutions is increasing-the CDC fund might be seen as an example of that-and there is still some way to go. However, the scheme has become so successful that people are beginning to question the motivations of those who are investing in such funds. I am not against people making a decent return, but let me highlight a recent example that was brought to my attention.
A Mexican microlender with more than 840,000 customers went public in 2007, and raised $450 million for a group of backers who had originally invested about $6 million, which is the sort of return that most of us would like to see. In the analysis of that particular case, it emerged that the bank involved routinely charged annual interest rates of more than 100 per cent and that the overall return on equity enjoyed on the project was three times the 15 per cent. delivered by traditional lenders. So we can understand why the non-governmental organisations sometimes get a little uneasy about that type of finance and I hope that the Minister can offer some reassurance about how we are tackling what are perhaps the excesses at the margins of microfinance. Nevertheless, with pressure on public spending in the developing world becoming more severe, it seems to me that a proportion of any increase in the resources available for development assistance will certainly have to come from microfinance initiatives.
We will have to tackle the different issues that were raised by the hon. Member for Cities of London and Westminster. For example, he raised the issue of the evidence that has emerged from different studies, which does not always seem to conclude that microfinance is a good thing. However, in anticipation of today's debate, my hon. Friend the Member for Mid-Dorset and North Poole and I were discussing this issue yesterday and she used a very good example of a woman who had enjoyed the use of microfinance. That woman herself had not seen a huge change in her income, but she had received a good, stable income, which enabled her children to receive proper schooling. Indeed, one of her children is now able to study for a master's degree, which would otherwise not have been possible. So the impact of microfinance might not be immediately obvious, but through the generations it certainly becomes obvious.
In today's headlines in the United Kingdom, we are hearing the heralding of the end of the great recession, although, as with everything that is advanced, we will wait to see the detailed figures before we start celebrating. As parliamentarians, we are inevitably and rightly preoccupied with the impact of what until recently we were calling "the credit crunch" on our constituents and
focusing on the policy responses that we need to see to help many of our constituents to get out of the difficulties that they are in. However, in doing so I strongly believe that we must not lose sight of the wider impact of the downturn on the developing world. Private finance plays a critical role in alleviating that impact and it is currently drying up. If ever there was a moment for us to focus on the importance and the potential of microfinance, it is right now.
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