CB BureauThe number of the world’s poorest families who received
access to microcredit and other financial services declined – for the first
time – in 2011 over the previous year and India accounted for almost all of the
reduction, according to the latest ‘State of the Microcredit Summit Campaign
Report’. The report informs that in 2011 microfinance providers reached fewer
people living in extreme poverty than they did in 2010.
This marks the first time since the campaign started
recording Institutional Action Plans in 1998 that both the total number of
clients and the number of poorest families reached declined from one year to
the next, the report said. Every year since 1998, the campaign has collected Institutional
Action Plans from microfinance providers around the world to see how many of
the world’s poorest families have had access to financial tools and other
services they needed to lift themselves out of poverty.
India accounts for almost all of the reduction in
clients worldwide, the report said. In 2011, there were 14 million fewer
poorest clients in India than in 2010. Most of the reported reductions come
from Andhra Pradesh, where fast growth led to over-lending, harsh collection
practices and heavy regulation from the state government. Many MFIs and banks
stopped lending to microfinance clients and self-help groups as a result, the
report said. Moreover, there is investor wariness as banks and other investors
in India and other countries curtailed their investments in microfinance.
At the same time, the report clarifies, India is not the
only country to have seen a reduction in clients. MFIs in Bangladesh responded
to political uncertainty and fears of an over-saturated market by lending to
some 600,000 fewer clients in 2011 (and reached even fewer clients living on
less than US$1.25 per day). Reductions in these two countries had a major
impact on worldwide totals: together the two accounted for 62 per cent of the
world’s microfinance clients and 76 per cent of those living in extreme
poverty.
Other regions of the world showed different growth
patterns. The number of poorest clients served slowed in Asia, Eastern Europe
and Central Asia, and Latin America and the Caribbean; rebounded from slow
growth in 2010 in the Middle East and North Africa; and accelerated in
sub-Saharan Africa.
‘If we want to provide financial services in a way that
helps people move out of poverty, then we need to provide things that cannot be
stolen. We need to provide products and services that help people living in
poverty to address the many areas of vulnerability that they face, so that
their hard-earned gains are not taken away by disaster and disease,’ the report
said.
In order to be more effective, microlenders should tap
the potential benefits of technology, which in turn is likely to cut costs,
improve client privacy, bridge physical distance and improve quickness of loan
disbursement. A survey of more than 147 developing countries found that 1.7
billion people do not have a bank account but do have a mobile phone.