Reply #45: the UNDP's MicroStart program [View All]

[iverglas]

http://www.uncdf.org/english/microfinance/microstart/programme.html

This is a development assistance program. Funds are being spent. Funds donated by donor partners in the program:

MicroStart's principles of operation are methodology neutral. Worldwide, microfinance institutions have been successful in reaching the very poor by lending to solidarity groups, through village or community banks and directly to individuals. MicroStart works with a variety of institutions to establish or strengthen microfinance operations, including specialized NGOs, credit unions, banks, and multi-purpose institutions. When an organization provides other services, the microfinance services are separated from other operations and are treated as a separate cost center.

Financial support to MicroStart has come from a number of sources. UNDP country programmes initially started based on a 'buy-in' from UNDP Country Office funds. More recently, financial support has come a number of additional sources. Investors include Citicorp Foundation, UNDP's regional bureaus (UNDP Africa and Arab States), the United Nations Foundation, the Netherlands Government, the Canadian Government, the African Development Bank, the Finnish Government, the Australian Government, the United Nations Capital Development Fund (UNCDF) and the host governments where MicroStart operates. In June 2002, accumulated resources mobilized total US$48,515,121.

The aim of the program is

to build a new generation of MFIs <microfinance institutions> that have transparent track records and solid institutional and financial performance, which enable them to reach poor clients while operating on a sustainable basis.

The aim of microfinance is of course to improve the welfare of the very poorest people and communities on the globe, by enabling them to break out of the cycle of poverty.

For instance, people who make craft items that they have always sold to a profiteering middleperson, to whom they are permanently in debt for the materials s/he provides, are able to use tiny loans to get out of debt and buy their first stock of materials, and perhaps organize collectives to sell their products directly to market instead of through the middleperson, thus earning what their labour is worth. And thus being able to afford school fees for their children, for instance.

When handing out other people's money in the form of loans, an agency such as the UNDP has to ascertain the most effective ways of achieving the objectives for which it is lending money, and the ways that are least likely to result in the money being lost. It can't just hand out money to whoever looks needy and deserving. It has to target the money to people who are most likely to use it effectively for the intended purposes -- and to pay back the loan.

It conducts studies to evaluate the various elements of the ways that money is lent. And it has determined, based on its experience, that lending money to very poor women is both the most effective way of achieving its objectives and the most secure way of ensuring that its loans are paid back (and the money can be re-lent).

Targetting women is not *only* a function of their tendency to use the money effectively and pay it back; it is also a function of women's relative poverty in the communities and societies in question. Women are already poorer than men, so it makes sense to target women if the aim is the development of the community and society as a whole, and not the preservation and exacerbation of men's existing economic advantage. Damn that affirmative action shit.

But essentially, while there is of course an element of "affirmative action" in favour of disadvantaged women, that is partly because doing so benefits the collective, which is a main purpose of affirmative action anywhere; and the main point is that lending tiny amounts of money to women has proved to be, on average, the most cost-effective way of improving the community's/society's collective welfare.

And that is NOT a stereotype, it is a conclusion reached by some very expert people who set out to identify the most cost-effective way of spending other people's money. Which is generally regarded as what such people should be concerned about.

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