Today the All-Party Parliamentary Group on Microfinance/Microcredit, for which RESULTS UK hosts the Secretariat, held a high-level roundtable meeting on ‘Harnessing the power of microfinance in Africa: challenges and opportunities’. Joining us in a Committee Room in the Houses of Parliament were leaders from a range of stakeholders in microfinance. The meeting was chaired by Robert Syms, MP for Poole, and addressed by Francis Pelekamoyo, former Governor of the Reserve Bank of Malawi and Chair of Opportunity International Africa; Gareth Thomas MP, Minister of State for International Development; and Anton Simanowitz, a leading academic working on microfinance.
Gareth Thomas outlined exciting new plans from the Department for International Development (DFID) for a ‘multi-donor capacity-building fund for microfinance’, which will provide significant new resources for expanding access to financial services in Africa. The facility is currently being designed by DFID and is also supported by the World Bank. Only 20% of Africa’s population has access to formal or semi-formal financial services such as savings, loans and insurance, and in the poorest countries in the continent this number falls to just 10%. Lack of access to finance makes it much harder for poor people to escape poverty – by contrast microfinance programmes such as micro crop insurance (see microinsurance in the Philippines) can enable poor farmers to make investments in their crops that result in huge increases in yield and therefore income.
A very consistent message came from the participants at the meeting – that microfinance has huge potential for poverty-reduction, but that the facility must be designed to promote good-quality microfinance that has the greatest possible impact on social indicators such as poverty, health and education levels. This does not happen automatically from all microfinance programmes, but is the result of deliberate, careful design and planning. Participants emphasised the importance of keeping a focus on the ‘woman sitting on a mat in an African village’ – by which they meant that DFID must pay very careful attention to how the fund assists its end beneficiaries, the microfinance clients.
DFID are now entering a consultation phase for the design of the fund, and a concept note has recently been completed. We will post this as soon as it has been released.