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Dear faithful reader,
MICRO
FINANCE IS NOT THE ANSWER TO THE DEVELOPING GAP
Click
here for the beginning of the article
Micro finance could be defined
as banking for poor. It had been developed and popularized by Professor
Muhammad Yunus. The word micro-finance itself covering a wide range of micro
loans, which need to be defined in a proper manner in order to know what one is
speaking about. The paper dedicated by Pr. Yunus to the
definition of micro finance is worth reading because the proper definition
of the several categories of micro financing is necessary to devise proper set
of actions to reaching the persons who precisely need micro-finance.
For
this article let us just consider the broad definition that reads as follows:
Providing unsecured small amount of money to the poorest portion of the populations
in developing countries.
MILLION
OF POOR AROUND
THE WORLD BENEFITED FROM MICRO FINANCING
The
World Bank estimated in 2003 that there are over 7,000 microfinance (MF) institutions,
serving some 16 million poor people in developing countries. These MF institutions
more or less imitated Pr. Muhammad Yunus Grameen
Bank in Bangladesh. The Grammen Bank alone provided MF loans to 5 million
poor in Bangladesh in 2003.
One should hail the humanitarian movement
initiated by Pr. Yunus and emulated by many around the world. However, intellectual
honesty recommends noticing that these achievements represent a drop of hope
in a sea of poverty.
Indeed, we live in a world of deep poverty amidst
plenty. Half of the world population - 2.8 billion people - live on less than
US$2 a day, and 1.2 billion, a fifth of world population, live on less than US$1
a day. In several African countries the percentage of people living on less than
US$ 1 or 2 per day far exceed world's averages as
here exposed.
MICRO
FINANCING ALONE DOES NOT REDUCE POVERTY IN DEVELOPING COUNTRIES
-Let us analyze the impact of Micro Financing in Bangladesh to see if it helped
to reduce poverty level in said country.
The graph at the left side
shows the level of poverty in Bangladesh during the last decade of past century.
The period during which micro financing empowered up to 5 million people - in
majority women - to becoming more or less financially independent through self
employment.
One notices there is no change in the number of people living
in poverty in spite of the "remarkable" achievement of the micro financing
system in Bangladesh.
Table below is even more explicit. One notices that
Bangladesh's per
capita Gross National Product (GNP) evolution is flat around US$ 370 per year.
That explains why there is no reduction in the percentage of poor either in rural
or urban areas. Further, the apparent good performance of the economic growth
rate in 2003 (5.3%) is eaten by the inflation rate (4.2%) and the population growth
rate (2.06%). Therefore, there is no economic growth's margin left to creating
riches and consequently fighting against poverty.
| Economic
Indicators About Bangladesh |
| Years | 1990 | 1999 | 2002 | 2003 | 2004 | | Population
(x million) | 108.9 | 128.1 | 131.4 | 138.5 | 141.3 | | Population
Growth rate | 1.9 | 1.8 | 2.6 | 2.06 | 2.06
est. | | Per
capita GNP (US$) | 280 | 370 | 373 | 370 | 372
est. | | Annual
economic growth rate | 2.2 | 3 | 4.4 | 5.3 | 5
est. | | Inflation
rate | 5.5 | 5.5 | 3.1 | 4.2 | 4.7
est. | | Urban
poverty line | 47.6 | 49.7 | 48.3 | 48.1 | 49.5
est. | | Rural
poverty line | 47.8 | 47.1 | 48.6 | 49.5 | 49.7
est. | | Sources:
Asian
Development Bank and the World Bank | SO
WHAT?
Figures
in above Table and comments made in previous paragraph show clearly that micro
financing is not the solution to bridging the developing gap in Bangladesh, and
therefore, in any other developing country.
Micro finance provides
survival means to the poorest of the poor; but it does not trigger sustain economic
development - even in rural areas where it is the most used. It does not create
sufficient jobs to cope with demand and the growth rate of the populations.
The only way developing countries would achieve that is to engineer double-digit
growth rate of the global economy; year over year.
According to a joint
World Bank/Asian Development Bank report, Poverty in Bangladesh: Building
on Progress, released on April 27, 2003, experts wrote:
"For Bangladesh
to meet its poverty reduction goals, it must grow its economy faster than it ever
has-with an annual average GDP growth rate of at least 6 percent," said Salman
Zaidi, World Bank senior economist and lead author of the report. He continues stating, "That may seem
like a tall order, but it is possible, and the country has shown that it has the
capability to achieve this, as long as it maintains consistency of commitment
and effort."
In another study - Bangladesh 2020 - prepared by a
group of leading Bangladeshi scholars with the support of the World Bank, experts
go further stating:
"Bangladesh's growth rate must be at least
7-8 percent per annum if it is to eliminate poverty substantially within two
decades. Although there is some potential for continued agricultural growth
through higher productivity and diversification, lifting the growth rate on a
sustained basis will depend on strong industrial performance, with industrial
growth averaging 8-10% annually."
Conclusions made through these
reports are in accordance with analysis
and studies published by
Africabiz Online about the developing of sub-Saharan African countries - (SSA).
Unless these countries target double digit growth rate, there is no hope to alleviating
poverty in a century time - if ever!
Up to 80% of SSA's populations live
in rural areas. Empowering rural people to earning descent salaries and wages
is the key to successful developing. The continuous increase of the purchasing
power of rural people is the key. That would be achieved only through a developing
strategy that closely links agriculture, transformation of crops and related services
as here described.
To
conclude, one is entitled to say that Micro Finance alone is not enough to bridging
the developing gap. Micro Financing would play a more dynamic role if included
in a global developing strategy that helps diversifying economic activities in
rural areas. And to diversify economic activities, financing, far beyond the
micro finance system, will be needed because "Before
Trade Comes Production of Goods and Services At Competitive Prices".
Therefore, the Action Plan on Poverty decided
upon by the G-8 heads of states at the last meeting (June 8-10, 2004) of the
club, at Sea Island, Georgia, USA, is not the answer to the problems sub-Saharan
African countries are confronted with, which read as follows:
a)
High level of poverty (up to 80% of the population in some SSA countries);
b) High level of unemployment (up to 70% of the available working force
outside agriculture);
c) Low purchasing power (flat evolution of the
per capita GNP around US$ 500 per year - over three decades running). |
To
become an effective "weapon" to fighting poverty in Africa, the Action
Plan on Poverty, would need to properly address the problem of financing global
developing schemes in each single sub-Saharan African country, through the
set up of a "Bank Guarantee Structure" for Africa as here
briefly exposed
"CONTRIBUTOR'S
GUIDELINES" are
available here. We invite
you to contribute to AFRICABIZ ONLINE MONTHLY ISSUE - with articles related
to "How Africa Could Bridge The Developing Gap".
Many
thanks for subscribing to Africabiz. See you on July 15, 2004.
Dr. B.M. Quenum
Click here for contact & support console
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Opportunities
TROPICAL ROOTS AND
TUBERS (PART VII): C- OPERATING BRIEFS ABOUT CASSAVA PLANTATION
Starting
from Issue 60, four deliveries (A - Introduction
B- Market
C - Plantation's creation and D - Medium-scale industrial production unit) deal
with the production of a granulated cassava flour that is a popular food in Africa:
GARI
A
medium scale processing plant to producing Gari is discussed in delivery N°:
63. (July 15-August 14, 2004.) Said plant is tailored to transform 10,000 metric
tons per year of fresh cassava - at full capacity and at following operating conditions:
a) One shift / 8 hours / day - b) 22 days per month and c) Processing of 38 metric
tons of fresh cassava per day. More details on operating conditions are provided
in issue 63.
Therefore, the plantation, considering Cassava variety TMS
81/ 00110 that produces 28 metric tons of fresh cassava per hectare (in optimal
cultivation conditions), should cover an area equal to: 357 hectares. Let us make
it 360 hectares - assuming some minor discrepancies in production's yield. Those
360 hectares are divided in 12 plots of 30 hectares each. Harvesting of each plot
occurring after 13 months.
Planting and harvesting period - considering
root maturity: 13 months - could be organized as par Table
available here
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