Microfinance key to alleviating poverty in forest communities
February 8, 2006
Basic financial services can help families start their own small businesses
Giving poor forest-dwellers access to basic financial services is a key element in helping them improve their living standards, according to a new FAO publication.
The publication, Microfinance and forest-based small-scale enterprises [PDF], funded by Norway, shows how microfinance can help low-income households living in forest areas start up and run their own small businesses. Such forest-dwellers frequently live in remote areas where a lack of financial services is a major obstacle to developing successful business activities.
“Opening up the possibility of taking out loans and saving money with interest is crucial to helping poor households who earn their living from forest products to establish their own small-scale enterprises,” according to Sophie Grouwels, an FAO forest expert.
Microfinance is a general term referring to the provision of basic financial services such as credit, savings, leasing, equity financing, insurance and remittance mechanisms by banks, non-governmental organizations and credit- and savings cooperatives in both the formal and informal financial sectors.
Close to 100 percent recovery rate in Nepal
Microfinance and forest-based small-scale enterprises includes a number of success stories, including one from the Parbat District of Nepal, where 673 small-scale enterprises were set up under a microfinance enterprise development programme, creating employment in rural areas that depend on trade of non-wood forest products such as honey, allo (traditional cloth made from nettles) and lapsi (a fruit used to make drinks and candy). Some 669 of the businesses, or 99.4 percent of programme participants, paid back their loans in full.
“Several factors contributed to this success,” said Sven Walter, an FAO forest expert. “The entrepreneurs were carefully selected using stringent criteria, the enterprises had access to business development services, and they were monitored regularly.”
He continued: “The provision of microfinance in itself will not break the cycle of poverty. To succeed, it must be accompanied by other services provided to the small forest enterprises.”
Microfinance can do even more
FAO’s new publication suggests that in addition to their regular services, microfinance institutions should provide business development counseling and support to small enterprises. It notes as well that there is often a need to break social barriers that can discourage rural people from approaching financial institutions for help.
Microfinance and forest-based small-scale enterprises also warns against the imposition of artificial ceilings on interest rates and subsidizing targeted credit programs, since this can distort the market and make microfinance less sustainable.
Ebay Inc. founder Pierre Omidyar and his wife, Pamela, have given $100 million in eBay stock to Tufts University to create a fund that will invest in microfinance. Microfinance, the practice of loaning small amounts of money to people who are often too poor to qualify for conventional lending, is increasingly seen as a promising means to help the world’s poorest people. Supporters argue that microfinance can fund microenterprises that generate broad-based, long-term economic growth opportunities in developing countries. The $100 million gift is the largest that Tufts — a university near Boston — has ever received. The Omidyar-Tufts Microfinance Fund will be administered by the university
Google, MIT support $100 laptop for the world’s poorest children
October 6, 2005
Google, AMD, Brightstar, News Corporation, and Red Hat have signed on to MIT’s low-cost laptop initiative which aims to deliver a fully functional $100 machine to the developing world.
Microentrepreneurship program for villagers in the Gambia
September 9, 2005
Poor communities in the Gambia are now earning regular income by selling forest products, thanks to an FAO programme that helps communities to build up markets for local products..
Cell phones may help “save” Africa
July 11, 2005
For all the talk about “making poverty history” through aid and debt relief at the G8 meeting in Scotland and among aging rock stars at Live8 concerts, perhaps the best tool for poverty alleviation on the continent is the mobile phone. Yes, that ubiquitous handheld device has done wonders for the poor around the world.
This past Saturday millions of people watched the anti-poverty “Live 8” concerts held in London, Tokyo, Johannesburg, Paris, Rome, Berlin, Moscow, Philadelphia and Barrie, Canada. Live 8 coincides with tomorrow’s G8 summit of world leaders and aims to raise awareness of the need for aid, debt relief and fairer trade for Africa. While the cancellation of debt and delivery of aid to Africa is a noble and needed cause for a desparately poor continent, policy makers will need to ensure that funds are spent wisely to maximize the benefits for the largest number of Africans. In the past, aid to the developing world has met mixed reviews. Some of the largest recipients of aid are still some of the world’s poorest countries. What’s going on here? Have aid agencies just been throwing money into a hole?.
Mobilizing seniors to fight poverty in Africa
July 4, 2005
For all the hype around sending billions of dollars in aid to Africa, it is important to remember that money must be spent wisely. Some of the largest recipients of aid in the past are still some of the world’s poorest countries thanks to corrupt regimes that consumed massive amounts of aid. Direct aid has not only bred corruption and the misallocation of resources away from those who need it most, but it has also fostered dependency and skewed the perceived value of goods and services. One program that could have potential for real poverty alleviation in Africa is a “Gray Corps” concept which would take advantage of the experience and expertise of aging Americans (aged 65 and older), a segment of the population that is expected to grow from approximately 35 million in 2000 to an estimated 71 million in 2030. This group could be key to addressing a number of looming social issues both here in the United States and abroad.
Developing sustainable business models that address the needs of the world’s poor
People involved with international development and poverty alleviation programs are increasingly looking toward the private sector for inspiration and assistance. Many believe that involving business in such efforts will not only bring wealth, respect, dignity, and improved education and health to the world’s poor but also prove to be a profitable business strategy.
Secondary school students from Nigeria competing against Poland? Russia versus Ghana? US versus Tajikistan? South Africa versus China? Ukraine versus the Philippines? Yes, but this is not a soccer match-it’s the “SAGE World Cup.” Rather than kicking a ball through a goal, these Students for the Advancement of Global Entrepreneurship (SAGE) will explain how they have completed entrepreneurship projects and social ventures for the betterment of their communities. The best team will be crowned “SAGE World Cup” champion on 11-14 August in San Francisco. Gray’s International College from Kaduna State will represent Nigeria in this unique program that combines local collaboration with global competition.
This is a modified news release from the FAO.