September 2007: Microcredit SupportIn 2000, all of the world’s leaders agreed to put policies in place to achieve the Millennium Development Goals (MDGs), a compact between the global North and South to realize a set of bold, specific, poverty reduction development targets by 2015, including halving severe poverty, expanding education for all children, empowering women, fighting major killer diseases and reducing maternal and child deaths, and protecting the environment. We are now at the midpoint, but unfortunately many poor countries are not on track to achieve these crucial development targets, and many rich countries have still not fulfilled their half of the bargain by putting in place the aid, trade, and debt policies necessary to help poor countries alleviate poverty. As the largest international lender for developing countries, the World Bank has enormous influence as to whether the world will achieve the MDGs. The Bank’s stated mission is “global poverty reduction and the improvement of living standards” and “working for a world free of poverty,” yet the World Bank is still not investing enough in proven anti-poverty solutions, especially in sub-Saharan Africa, and Bank policies are not supporting the needs of the very poor. One such program is microcredit, the provision of tiny loans and other financial services to very poor people in order to start or expand individual businesses. However, despite demonstrated success and the Norwegian Nobel Committee’s recognition of its power to end poverty and promote peace by awarding Dr. Muhammad Yunus and Grameen Bank the Nobel Peace Prize in 2006, the World Bank is investing little if any funds on microcredit for the very poor (those who live on less than $1 a day). In addition to its woefully inadequate investment in microcredit, the World Bank is also failing to take action to address other urgent health and education needs of the very poor, especially in Africa. The Bank’s current investment in TB in Africa (which has the highest TB rates in the world) is minuscule; and education lending for Africa will fall precipitously unless action is taken now. Despite its own evidence of the negative effects of user fees on the very poor for essential health services, the Bank has continued to support this harmful practice. The two previous World Bank presidents ignored meeting requests by the U.S. Congress to discuss increasing funding for microcredit and ensuring that at least half of those funds reach the very poor. However, the new president of the World Bank, Robert Zoellick, has agreed to come to Capitol Hill this fall for a meeting about the Bank’s microcredit policies. Members of Congress should attend this upcoming meeting and urge Mr. Zoellick to invest more in microcredit and question why the Bank is not doing more on proven health and education investments that will directly help the very poor.
What Should the World Bank Do?World Bank President Zoellick has the opportunity to steer the Bank in a new direction and reform policies in favor of more pro-poor investment that will align Bank practices with its stated mission of alleviating poverty. The World Bank must increase its investment in microcredit for the very poor, as well as proven health and education interventions, and address harmful policies. Empower the Poor Through Microcredit: Microcredit is a successful, cost-effective tool to help the very poor lift themselves out of poverty and improve the lives of their families. Microcredit loans, averaging less than $150, allow people to start and expand tiny businesses without depending on money-lenders who charge exorbitant interest rates. Microcredit gives borrowers, especially women, the capacity to improve their lives and the futures of their children. Muhammad Yunus, the founder of the Grameen Bank, notes the first thing a woman does with the proceeds from her loan is “bring their children home” — literally liberating their children from servitude forced by poverty. The whole community benefits when microcredit is available, even in areas devastated by poverty and HIV/AIDS, e.g., Ugandan microcredit borrower Gertrude Ssebunya has received seven loans since 1999, which she has used to provide community health services. Gertrude also cares for fourteen AIDS orphans: “All of us are caring for orphans. . . . My dream is to see these children go to school, get educated, find work and live with hope — like I do.”[1] The World Bank’s own research shows that microcredit is a proven, effective tool for addressing the worst aspects of poverty, even among the very poor. An in depth World Bank study examined three Bangladeshi microcredit institutions (MFIs): BRAC, Grameen Bank, and RD-12, the latter a government program. The study found that 3 percent of clients left poverty each year thanks to their microloans, that 1 percent of non-clients left poverty due to the spillover effect of increased economic activity at the village level, and that microcredit accounted for 40 percent of the entire reduction of moderate poverty in rural Bangladesh. However, microcredit is a development tool that has been underutilized by the Bank, especially with regard to empowering the very poor. The Bank has confirmed that it cannot completely assess the level of funding dedicated to microcredit, nor what proportion of that funding is benefiting the very poor — those living on $1 a day or less. To take advantage of this critical development tool, the World Bank must: 1) increase its investment in effective microcredit programs with capacity and/or track record in reaching large numbers of very poor people; 2) commit to ensuring that half of those resources directly benefit borrowers living on $1 a day or less; 3) require the use of cost-effective poverty measurement tools to measure the poverty level of borrowers and thereby ensure compliance with that goal; and 4) report on the results. Respond to Africa’s Health Emergency: Tuberculosis: TB is the greatest curable infectious killer in the world and the number one killer of people living with HIV/AIDS. Sub-Saharan Africa has the world’s highest TB rates and worst treatment outcomes, and in some sub-Saharan African countries, up to 70 percent of people living which HIV/AIDS die from TB, making treating TB one of the best ways to reduce deaths due to AIDS. Two years ago, African ministers of health declared TB a continent-wide emergency. Extensively drug-resistant TB (XDR-TB), first reported in South Africa last year, is now threatening to undermine global progress in the fight against HIV/AIDS. The Bank’s commitment to combating this pandemic is critical and it has recognized that TB control is one of the most economically effective health interventions. Last year, RESULTS International released a report on the World Bank and TB found that the Bank devotes less than 1 percent of health sector financing for Africa to TB, despite an $11 billion funding gap to achieve the MDG target for reversing TB in Africa.[2] The Bank must take on the report’s recommendation and support sub-Saharan Africa by scaling up TB investments to at least US$1.1 billion over the next decade. Health User Fees: The Bank’s own research shows that user fees for essential health care have been very injurious to public health and that the strategy of providing “exemptions” for the poor has failed. However, the Bank has failed to act on this evidence. The Bank must clarify the negative impact of user fees on poor people’s access to health care, stop supporting these policies and declare its commitment to working with countries to eliminate them. Support Universal Access to Basic Education: Even though sub-Saharan Africa has the lowest rates of primary school enrollment of any region, there has been a gradual decline in World Bank education lending to Africa in recent years. As of this summer, there was only one identified project in the pipeline to fund basic education programs in the region in 2008. Considering that increases in women’s education were the single largest factor contributing to declines in malnutrition between 1970 and 1995, that education can put women on the path to economic and social empowerment, and that literacy gains of 20 to 30 percent can boost a country’s GDP by 8 to 16 percent, it is shocking that the Bank is failing to invest in basic education where it is most needed and can have the greatest impact. The Bank must play a central role in investing in basic education, especially in Africa. What Should the U.S. Congress Do?Members of Congress should attend the upcoming Hill meeting with new World Bank president Robert Zoellick to discuss reforming the Bank’s policies that affect the very poor, including its lack of investment in microcredit, TB programs, and education, as well as its policy on user fees.
[1] Story provided by Opportunity International. [2] In July 2007, WHO launched the MDR-TB and XDR-TB Global Response Plan, which calls for an additional (i.e., over the resource needs identified by the Global Plan) $700 million and $1 billion worldwide in 2007 and 2008 to respond the emergence and spread of drug-resistant TB. WHO estimates that at least an additional $1 billion will be needed annually from 2009 to 2015. |