HC Deb 05 May 2004 vol 420 cc1595-8W
Mrs. Brooke

To ask the Secretary of State for International Development how much money his Department spent on microfinance or microcredit projects(a) in total and (b) by continent in each year since 1997. [170465]

Hilary Benn

Access to financial services for people living in poverty is a critical condition for the achievement of the Millennium Development Goals. Since 1990, DFID has been working, with many partners in the UK and overseas to broaden access for poor people to financial services, including microcredit.

In addition to specific programmes that have microfinance as the central activity, DFID has supported many programmes within which microcredit has played a small but important role. In addition DFID has provided funds for research into microfinance, and innovation funding for new microfinance products. DFID has not maintained a central register of these various applications of funding for microfinance over the past 15 years.

Since 1997, DFID has spent or committed in excess of £150 million on programmes where microfinance has been a core activity. Of this sum, approximately £70 million has been spent or committed in Africa, with the most of the remainder funding microfinance programmes in South Asia, East Asia, Russia and the Caribbean.

Mrs. Brooke

To ask the Secretary of State for International Development (1) what discussions his Department has had with(a) the United Nations Development Programme and (b) other UN departments in advance of the United Nations Year of Microcredit in 2005; and if he will make a statement; [170466]

(2) what discussions he has had with external organisations regarding the promotion of microfinance and microcredit as a priority during (a) the Prime Minister's Commission for Africa over the next 12 months and (b) the UN Year of Microcredit 2005. [170512]

Hilary Benn

DFID, alongside other donors, has for many years actively supported the development of policies and institutions to extend the outreach of sustainable microcredit and other financial services to the poor. As an active member of the Consultative Group to Assist the Poor (CGAP), an international agency of 29 donors promoting best practice globally in the microfinance industry, DFID has been instrumental in linking CGAP with the organisers of the International Year of Microcredit.

The UN Capital Development Fund, and the UN's Secretariat's Department of Economic and Social Affairs, will jointly co-ordinate the preparation activities of UN system for the International Year of Microcredit. DFID officials have met with the United Nations Capital Development Fund (UNCDF) Secretariat staff on three occasions in the last six months. In addition DFID has facilitated discussions between CGAP and UNCDF with the objective of enhancing joint messages on microfinance, and possibly jointly participating in events during the year.

DFID officials have also met with Citigroup, one of the private sector sponsors of the year, and plan to meet with other international and UK organisations currently involved in the provision of microfinance overseas.

DFID is committed to the growth of small enterprise, and issues of trade and growth are being considered as among the UK's priorities for the Presidency of the G8 in 2005. The first meeting of the Commission for Africa is being held on the 4 May, and this meeting will consider themes and priorities for detailed study. Support for promoting private sector development to accelerate the continent's growth is clearly a likely topic, and such support may have linkages with financial sector development objectives.

Following additional debate with other donors, and through CGAP, the UK will further contribute to the preparations for the International Year of Microcredit. Following very recent discussions, Consultative Group on Aid for the Poorest (CGAP) has issued a set of "Key Microfinance Messages for the UN Year of Microcredit" as a contribution to international knowledge messages for dissemination during the International Year. DFID plans to support specific UN Year events in the UK next year, and hope to finalise and announce them in the autumn of this year.

Mrs. Brooke

To ask the Secretary of State for International Development which 20 non-governmental organisations working in(a) Africa and (b) Asia received the highest amount of grant from his Department for microfinance or microcredit projects in each year since 1997. [170467]

Hilary Benn

DFID provides financial support according to local needs and circumstances. DFID does not maintain figures to provide detailed comparisons between NGOs. A small NGO, with a few thousand borrowers living within a small locality, might benefit as much from a small DFID development grant as a large microfinance NGO, with hundreds of thousands of borrowers, might from a more significant grant.

In Asia, many local NGOs have benefited from grants provided by DFID and other donors to "apex" organisations such as PKSF in Bangladesh, and the Small Industries Development Bank of India. DFID has also provided significant support directly to large NGOs in Bangladesh such as BRAG and Proshika, and to the Aga Khan Foundation in Pakistan.

In Africa, DFID has supported both UK, international, and local microfinance NGOs. International organisations supported include Opportunity International, CARE International, Oxfam, and World Vision. Local NGO microfinance organisations supported include CETZAM in Zambia, WEDCO in Kenya, and Concern in Malawi. Others include Sinapi Aba in Ghana, K-REP in Kenya, and CRESCE in Mozambique.

DFID is seeking to build financial systems that work for the poor. NGOs are not the only route to achieve successful financial services. Private banks and other commercial institutions can also provide useful financial services on a sustainable basis, and informal mechanisms, such as rotating savings and credit clubs also have an important role to play, particularly in hard to reach locations. Finally, savings and credit cooperatives, in many developing countries, serve more poor clients than microfinance organisations. It is therefore important for DFID to support many players in the financial sector so as to achieve sufficient outreach to poor people, and to ensure financial sustainability.

Mrs. Brooke

To ask the Secretary of State for International Development what assessment his Department has undertaken on the effectiveness of(a) microfinance and (b) microcredit programmes in (i) specific African countries and (ii) other developing world countries; and if he will make a statement. [170542]

Hilary Benn

DFID agrees that microfinance is a powerful weapon against poverty, and that access to financial services enables poor people to both increase their incomes, and to reduce their vulnerability to external shocks. DFID is committed to ensuring that microfinance is used effectively, both to create sustainable institutions, and to impact on the livelihoods of poor people.

DFID has commissioned microfinance impact assessment surveys in many African countries, including Kenya, Malawi, Mozambique and Zambia. Similarly, DFID has supported impact assessment in Bangladesh, India, Russia and other countries in Asia and Europe. DFID has also commissioned substantial international research activities into microfinance.

Several UK academic institutions, such as the Institute of Development Studies in Sussex, are continuing this tradition of detailed research into the impact of microfinance. With the assistance of other international partners, such as the Ford Foundation, microfinance impact research more recently has been examining the wider impact of microfinance, in other words its impact on the local and national economy rather than just the impact on households participating in direct microfinance.

Mrs. Brooke

To ask the Secretary of State for International Development how many women and children(a) worldwide and (b) in Africa his Department estimates have been lifted out of poverty as a result of microfinance or microcredit programmes (i) in total and (ii) in each year since 1995. [170543]

Hilary Benn

DFID has supported microfinance for many years, as a means to allow poor people in developing world to escape poverty. However, microfinance is not a magic solution to the problem of poverty in the developing world. Even where detailed impact assessment has shown that microcredit has assisted a household to, say, increase its income to a level about a national "poverty line", there are invariably many factors at work simultaneously. The status of education and health, whether local markets function well, and the development of skills and competition, will all have a part to play in reducing poverty.

DFID does not seek to estimate figures on poverty reduction by type or cause. In its 2003 "State of the Microcredit Summit Campaign Report", figures collected from some 2,500 microcredit institutions globally indicate that they have reached some 42 million clients among the poorest people in their countries. According to this source, of these poorest clients, 79 per cent. were women.

On a regional basis microfinance is reaching many more people in Asia than in Africa. The challenge of expanding the outreach of financial services for poor people in Africa cannot be left to specialist microfinance institutions alone. Non-hank institutions such as post offices, savings and credit cooperatives, and building societies already reach many more people than microfinance organisations. Commercial banks are also expanding their outreach in many cases in Africa. DFID's objective it to contribute to the widening of the whole financial sector so as to better serve poor people in Africa.