Microfinance key to eradicating poverty
Microfinance key to eradicating poverty
Rita A.Widiadana, The Jakarta Post/Nusa Dua
The promotion of microfinance programs is crucial to accelerating
poverty alleviation, as it would help small businesses long
neglected by commercial banks, a three-day international seminar
here has concluded.
"We need a new paradigm of poverty alleviation. We have good
news that more countries have given more attention and efforts to
develop micro- and small business as one of the alternatives of
poverty alleviation," experts said in a joint communique issued
at the end of the seminar.
Some 300 experts participated in the seminar organized by Bank
Rakyat Indonesia (BRI) in connection with the United Nations'
Year of International Microcredit 2005, and put forth a number of
recommendations.
The concept of microcredit, developed in 1976 by rural
economics professor Muhammad Yunus of Bangladesh, concerns the
provision of loans to small entrepreneurs likely to be ineligible
for bank loans under traditional means of evaluating credit-
worthiness.
The experts concluded that the present financial system, which
exclusively favors the rich and large businesses, had created a
disparity of wealth.
"Microfinance development should put priority on expanding
accessibility to financial services for the poor. An inclusive
financial system will create distribution of wealth," the
statement said.
They also suggested that all countries must develop
microfinance immediately, regardless of an unavailability of
infrastructure, including legal framework and human resources.
"We cannot wait until all the infrastructure is in place,
since one billion out of 6.5 billion (people of) world
populations are waiting for action," the statement said.
Rudjito, president of BRI, an institution considered the
world's best microbanking model, had previously urged the
government and legislature to develop legal instruments for
accelerating the operation of microfinancing institutions in the
country.
According to BRI managing director Krisna Wijaya, the state
bank's microloans for small- and medium-sized businesses reached
Rp 38.5 trillion (US$4.31 billion) as of September, and was
expected to increase to Rp 50 trillion by the end of 2005.
Indonesia has been selected as one of the eight countries in
the world to have developed innovative microfinancing
successfully as part of a support program for small and medium
businesses.
The current government has vowed to expand the microfinancing
program further and is seeking necessary funds.
The latest government data shows that only 15 percent of some
30 million micro-entrepreneurs in the country receive financing
from banks.