MICROCREDIT SUmmIT CAMPAIGN HONORARY CO-CHAIRS Her Majesty, Queen Sofia of Spain Former Prime Minister of Japan, Tsutomu Hata COUNCIL CO-CHAIRS COUNCIL OF HEADS OF STATE AND GOVERNMENT * H.E. Vicente Fox, President of Mexico COUNCIL OF ADVOCATES * Chief Bisi Ogunleye, Chair, Country Women’s Association of Nigeria COUNCIL OF BANKS AND COMMERCIAL FINANCE INSTITUTIONS Eugene Ludwig, Managing General Partner, Promontory Financial, USA Andrew Krieger, CEO, Northbridge Capital Management, USA COUNCIL OF CORPORATIONS * Brett Begemann, Executive Vice President and International Commercial Lead, Monsanto, USA COUNCIL OF EDUCATIONAL INSTITUTIONS Ned Hill, Dean, Marriott School of Management, Brigham Young University James Gustave Speth, Dean, Yale University COUNCIL OF FOUNDATIONS AND PHILANTHROPISTS * George Soros, Chairman, Open Society Institute COUNCIL OF INTERNATIONAL FINANCIAL INSTITUTIONS * Lennart Båge, President, International Fund for Agricultural Development (IFAD) COUNCIL OF NON-GOVERNMENTAL ORGANIZATIONS Margaret Catley-Carlson, Chair ICARDA & Global Water Partnership Mazide Ndiaye, President and CEO, FAVDO COUNCIL OF PARLIAMENTARIANS Wakako Hironaka, Member of the House of Councillors, Japan * Sharad Pawar, Minister of Food and Agriculture, India * Michel Rocard, Chairman, Committee on Development and Cooperation, European Parliament COUNCIL OF PRACTITIONERS Nancy Barry, President, Women’s World Banking Ela Bhatt, General Secretary, Self Employed Women’s Association * Connie Evans, President, Women’s Self-Employment Program * John Hatch, Founder, FINCA International * Muhammad Yunus, Managing Director, Grameen Bank Those indicated with an asterisk (*) are also members of the Microcredit Summit Campaign Executive Committee. COUNCIL OF RELIGIOUS INSTITUTIONS William Vendley, Secretary General, World Conference on Religion Published in 2005 by The Microcredit Summit Campaign and Peace 440 First Street, NW, Suite 460, Washington, DC 20001 USA Copyright © 2005 Microcredit Summit Campaign, All rights reserved COUNCIL OF UN AGENCIES ISBN# 0-9763704-1-7 Noeleen Heyzer, Executive Director, UNIFEM * Juan Somavia, Director General, International Labour Organization Cover Design by Alyssa Boxhill STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2005 Written by Sam Daley-Harris Microcredit Summit Campaign Director Compiled by Brian McConnell D.S.K. Rao With Assistance from Nelson Agyemang Alicia Antayhua Anna Awimbo Armando Boquin Trenton DuVal Amna Kazmi Anjum Khalidi Lisa Laegreid Sherine Mahmoud Dalia Palchik Shiela Rao Adil Sadoq TABLE OF CONTENTS 1 Introduction 2 The Faces Behind the Statistics 3 The End of Poverty: An Inspiring Call and a Daunting Challenge 5 The Challenge of Ineffective Institutions 7 Making Way for the Revolutionaries 10 Myths that Impede Microfinance’s Full Contribution to the MDGs 17 A New Law and an Opportunity to Expand the Breakthrough 19 More than Just Reaching the Poorest 21 Survey Methodology 22 Clients Reached 23 Growth Resulting from Institutions Reporting for the First Time 25 Women Clients Reached 25 The Use of Poverty Measurement Tools 26 Regional Data 27 Reaching 100 million poorest by the end of 2005 28 Which Clients Are Not Being Counted? 29 Re-launching the Microcredit Summit Campaign to 2015 with Two New Goals 30 Regional and Global Meetings 2004–2006 31 Conclusion 33 Acknowledgements 34 Appendix I: Verified Institutions 45 Appendix II: Verifiers 51 Appendix III: Institutions that Submitted an Institutional Action Plan in 2005 ii STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2005 Introduction The Millennium Development Goals can be met by 2015—but only if all involved break with business as usual and dramatically accelerate and scale up action now. UN Secretary General Kofi Annan Eight years before these words were printed in the United Nations Development Program’s (UNDP’s) Human Development Report 2005, more than 2,900 people from 137 countries gathered in Washington, D.C., for the Microcredit Summit—a civil soci- ety-organized summit with a profound commitment to “break with business as usual and dramatically accelerate and scale up action.” Delegates to the 1997 Microcredit Summit launched an audacious campaign to reach 100 million of the world’s poorest families, especially the women of those families, with credit for self-employment and other financial and business services by the end of 2005. The Summit 1) broke with the tradition of excluding the poor from access to financial services, 2) broke with the tradition of excluding the poorest1 from international development, and 3) made a commitment to dramatically accelerating and scaling up action. This report outlines progress toward the 100 million poorest goal as well as barriers to reaching it. This As of December 31, 2004, Campaign offers much needed hope for achieving the Millennium Development 3,164 microcredit institutions Goals (MDGs), especially the goal of cutting absolute poverty in half by 2015. have reported reaching As of December 31, 2004, 3,164 microcredit2 institutions have reported reaching 92,270,289 clients, 92,270,289 clients, 66,614,871 of whom were among the poorest when they took their 66,614,871 of whom were first loan. Of these poorest clients, 83.5 percent, or 55,622,406 million, are women. among the poorest when they Seven hundred eighty-one of these institutions submitted an Institutional Action Plan took their first loan. Assuming in 2005. Together these 781 institutions account for 90 percent of the poorest clients five persons per family, the reported. Assuming five persons per family, the 66.6 million poorest clients reached by the end of 2004 affected some 333 million family members. 66.6 million poorest clients reached by the end of 2004 In order to reach 100 million of the world’s poorest families by the end of 2005, the affected some 333 million Campaign requires a 38.1 percent growth rate per year from its starting point of 7.6 family members. million poorest families at the end of 1997. The Campaign’s overall growth of 776 percent between 1997 and 2004 now averages just over 36 percent per year. This year, the Campaign was able to verify data from 330 institutions, representing 58,450,926 poorest families or 87.7 percent of the total poorest reported. A complete appendix of the institutions verified this year can be found in Appendix I. 1 The Microcredit Summit Campaign defines “poorest” as those who are in the bottom half of those living below their nation’s poverty line, or any of the 1.2 billion who live on less than US$1 a day adjusted for pur- chasing power parity (PPP), when they started with a program. As stated in past reports, the Campaign’s greatest challenge lies in bridging the gap between its commitment to reaching the poorest and the lack of a sufficient number of effective poverty measurement tools in use. Therefore, every mention of the term poor- est within this report should be read within the context of this dilemma. Our work to expand awareness about and use of cost-effective poverty measurement tools is described throughout this report. 2 For the purpose of this report, the 1997 Microcredit Summit, and the Summit’s nine-year fulfillment cam- paign, any mention of “microcredit” refers to programs that provide credit for self-employment and other financial and business services (including savings and technical assistance) to very poor persons. STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2005 1 Loans to 66.6 million poorest Loans to 66.6 million poorest clients affect a total of 333 million people, including clients affect a total of 333 both clients and their family members. The 333 million people affected equal the million people, including both combined populations of the United Kingdom, France, Germany, Italy, Spain, The Netherlands, Switzerland, and Norway, but their lives are dramatically different from clients and their family the lives of the citizens of those countries. members. The 333 million people affected equal the combined populations of the The Faces Behind the Statistics United Kingdom, France, Germany, Italy, Spain, The Microfinance stands as one of the most promising and cost-effective tools in the fight against global poverty. Netherlands, Switzerland, and Norway. Jonathan Morduch, Chair United Nations Expert Group on Poverty Statistics Janèt Dèval, a client of Fonkoze, a microcredit institution in Haiti, is one of the 66.6 million poorest clients reached. Janèt has been a credit client for more than two years and comes regularly to all meetings. She has also been a part of every literacy pro- gram available and is about to start the newest module on developing business skills. Not only could she not read or write when she started, but she has had an extra challenge: Janèt has only a fraction of her hearing due to an injury when she was 20 years old. My husband didn’t want me to send my five children to school because his parents didn’t send him to school. From the beginning, he said he would not pay and he has never given even one goud, but I always knew it was important. For a long time I have gone to Port-au-Prince to buy goods to sell in Hinche, and I put all my money into paying for school for my children. When I found out that Fonkoze gave literacy classes for market women, I was so happy. I never went to school even one day. I didn’t know anything about school. I started right away with basic literacy and I have tried to never miss a class. I couldn’t write my name and I didn’t understand anything, but I kept going even when my husband got angry. My kids pushed me and encouraged me and they helped me practice my letters. The monitor, Christa, told me to keep writing every day even when I didn’t understand. I can write my name now, and I write it everywhere. Imagine, I used to go to Port-au-Prince to buy and I couldn’t read the bags and I felt lost.