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"Bangladesh has Proved that Microcredit Works"

Dr Muhammad Yunus talks to The Daily Star on return from the Microcredit Summit

Interview by Sharier Khan
LEADERS of different nations. legislators, policy makers, donors and de rnent activists, tor the first time, found a new ray of hope at the recently-concluded Microcredit Summit that if everybody joined hands, it was possible to eliminate, not Just alleviate poverty from the face of the earth
The Microcredit Summit concluded in Washington DC on February 5 with a global com mitment to wipe out poverty of at least 50 per cent of the total poor in the world by providing them with microcredit — a credit system which had been practised to Improve the living standard of the poor by nongovernment financial institutions for two decades but was never recognised at a global level summit that It was an effective tool to eliminate poverty.
This microcredit thrust will have special emphasis on poor women.
Grameen Bank chief Dr Muhammad Yunus, one of the organisers of this summit, on his return from Washington DC. in an Interview with The Daily Star, termed the outcome of this summit as most successful.
The participation was more than our expectation. The summit was participated about 3000 representatives from different nations. They include heads of state or government of five countries, 20 ministers, a number of legislators, policy makers, representatives of
donor organisations and others.
"By participating and extending their support to the spirit of the summit the concept of microcredit as a tool to eliminate poverty has been legitimised." Dr Yunus told The Daily Star in an interview last week at his Mirpur office.
For the first time a major donor like the World Bank recognised microcredit and has committed support (to the microcredit providers), he said, adding it was a basic shift of focus of the donors' policy where microcredit never had any support.
The summit set a target of freeing 100 million poor, out of a total 200 million, from the clasp of poverty.with microcredit by 2005. Tills would require an Investment &T about 22 billion US dollars.
"Half of this money is expected to come from commercial sources, meaning banks and lenders. Of the remaining 11 billion dollars. 50 per cent will be raised as soft loans and the rest as grant," Dr Yunus pointed out.
"Considering the global loan market, this figure of 22 billion dollars does not seem impossible to me." the Grameen Bank chief said.
Different donor organisations of the world provide loans worth 60 billion US dollars annually. Of this figure, World Bank alone provides 30 billion dollars.
The summit did not specify how much each of the participants had to invest by 2005 in order to achieve the goal of elimination of poverty of the 100 million poor. But Japan and UNDP had pledged specifi-
cally to provide 141 million dollars in the microcredit schemes.
Now that the summit is over, another preparation is under way to set an international level trust which will act as an information and monitoring centre for the development activists in order to ensure achievement of the goals set by the Microcredit Summit.
Dr Yunus observed that a tremendous amount of energy was generated at the summit and thereby a lot of expectation about wiping out poverty has been created.
Now it is very important to achieve a considerable level of success by all of us. If we fail to go by our commitment, people would be frustrated, he pointed
Currently lending organisations of the world are providing Ioans to 8 million people. "A leap from 8 million people to 100 million means we have got a lot of works to do." Dr Yunus said.
In order to reach such an "ambitious goal’ within the time "limit, it needs sound prepara-
tion in terms of designing appropriate institutional framework, facilities for capacity building and i nsure availability of resources. The Grameen Bank chief noted that significant progress has been made In all these three areas.
Most significant even in the institutional side Is the creation of Consultative Group to Assist the Poor (CGAP). CGAP can act as the global centre of information and monitoring. It can also facilitate mobilisation of resources and . monitor flows of resources and ensure that microcredit is reaching the poorest and the organisations dispensing microcredit moving towards financial viability, he said.
Elaborating his ideas on how the future of microcredit would be shaped, he noted that between the CGAP and the individual donor on the one side and the grassroots microcredit organisations on the other, there would be a need for another type of institution to facilitate the link between the donor and the grassroots organisations.
It would be unwise for a donor to try to identify and enter into financial agreement with grassroots microcredit organisations directly. It will make the administration cost of the funds unacceptably high. A better alternative would be to create wholesaler organisations which will act as contractors for the donors.
Elaborating further he said, wholesaler organisations of this type already existed. Grameen Trust, ACCION. FINCA are international wholesaler organisations. They receive funds from multi-lateral and bilateral donors and channel it to the grassroots microcredit organisations throughout the world. They provide technical assistance, training, funds and everything a grassroots organisation may need.
There is another type of wholesaler organisation at the national level. In Bangladesh, the Palit Karma Sahayak Foundation (PKSF) fall in to this category. The PKSF receives funds from external donors, national government and other local donors and provides loans and support to grassroots level microcredit organisations.
The most Important action needed to reach the goal of the summit is to create at least one microcredit wholesaler organisation in each country to begin with. Gradually more domestic microcredit wholesaler organisations may be added. He further observed "If we create only one domestic microcredit wholesaler in one country it will create a monopoly situation and the quality and efficiency of its service may suffer "
Donors can support the creation and operation of international microcredit trust. Dr Yunus, sharing his thoughts further said. "This international trust will play a very important role in the Initial phase when domestic trusts are either not created yet or have not achieved the level of maturity that is needed for big operation."
“The other thing the summit brought us was a global focus on Bangladesh. This was a tremendous boost to the image of Bangladesh which had long sustained the image of basket case."
Bangladesh has given the idea of microcredit and proved to the world that it works. Out of the total 8 million poor benefited by the microcredit schemes, the Grameen Bank has 2.11 million clients. The model of microcredit designed by Grameen Bank has been picked up by other developing and developed nations to fight poverty.
,The fact that a poor woman" is getting a small credit of. say. five dollars and then she is pay ing that back in time is not the main thing. In between her taking of loan and its repayment, she is having a tremendous experience; she is gaining a new confidence that she has the ability of paying back her credit. This confidence leads her to take bigger things in her 1 i i e ■