Despite Progress, Microfinance Still “Has Far to Go”

While 28 percent of the global population lived in poverty in 1990, just 21 percent do so today, said Richard Weingarten, executive director of the United Nations Capital Development Fund. But that reduction has largely been driven by vast economic growth in east Asia, particularly in China and India, Weingarten said during the morning keynote speech at the second annual Chicago Microfinance Conference April 21 at Gleacher Center. “Poverty in the 50 least developed countries remains severe,” he said. “The number of people living on less than $1 a day in the least developed countries will increase to 420 million by 2015, if the current economic trends continue.”

Microfinance is in place in all regions of the world, reaching about 92 million clients through 3,100 microfinance institutions, Weingarten said. “That is an astonishing statistic,” he said. “If I had given this speech 20 years ago, there would have been hundreds, if we were lucky.”

Microfinance reduces poverty and supports economic growth, he said. “It is among the best tools that we have for reducing poverty among the very poor. When microfinance institutions that serve the lower end of the markets become sustainable, they reach on average 1.5 times as many borrowers as other MFIs.”

Nonetheless, penetration is “still very limited” and financial inclusion “has far to go,” Weingarten said. Of 2.5 billion of the world’s poorest, just 66.6 million have access to credit, he said. Among the challenges ahead are building vision among nations making microfinance a political priority, creating regulatory environments that remove constraints to inclusion, better incorporating technology, bringing more capital and capacity to financial service providers, increasing financial literacy and literacy itself, broadening financial products and services to produce social safety nets, and increasing participation of the private sector as an important player, Weingarten said.

—Phil Rockrohr