Harry Quick (Franklin, Independent) Share this | Hansard source

I move:

That the House:

(1)

notes that:

(a)

microcredit is a proven means of eradicating poverty and that research by the World Bank in 1998 found that 40 per cent of loan borrowers had moved out of poverty after four years;

(b)

at the Microcredit Summit in Halifax, Canada in 2006, Australia endorsed the goal of having 175 million families receiving microcredit by 2015;

(c)

if the Microcredit Summit goal was achieved, then about half the first goal of the Millennium Development Goals, which is to halve the number of people who live on less than a dollar a day, would be met;

(d)

Australia spent $14.5 million on microcredit in its overseas aid program in the 2005-2006 financial year, which was less than one per cent of the overseas aid budget; and

(e)

the USA, which has funded microcredit longer than most countries, has established a current benchmark level of 1.25 per cent of the aid budget for microcredit spending; and

(2)

urges the Australian Government to follow through with its endorsement of the 2006 Microcredit Summit Goal with an increase in funding of microcredit to $40 million per year, or a level of 1.25 per cent of the aid budget, starting with the forthcoming Budget.

The World Bank noted at the end of 2006 that microfinance had come of age. Two events during that year highlighted the recognition of the value of microfinance in assisting the poorer people to move out of poverty: firstly, the awarding of the Nobel Peace Prize to Muhammud Yunus, the founder of the Grameen Bank in Bangladesh; and, secondly, the global microcredit summit held in Canada in November 2006, which celebrated 10 years of remarkable growth in the number of very poor people now with access to credit and other financial services. This summit also set new goals to ensure that many more people can escape poverty through access to credit on reasonable terms.

The goal of this motion is to seek to match this increased recognition with action, through the Australian aid program, to support the further growth of microcredit. The Microcredit Summit Campaign sought to have microcredit achieve its potential to dramatically reduce poverty by setting an ambitious goal of reaching 100 million of the world’s poorest families with credit by 2005. When I attended the microcredit summit in Washington in 1997, approximately eight million very poor borrowers had access to credit. By the end of 2005, this number had increased more than tenfold to 82 million. It is likely that the number of very poor borrowers reached 100 million by the end of 2006. Therefore, the Microcredit Summit Campaign has achieved its original goal closer to the target date than any internationally agreed campaign to reduce poverty.

Several studies have illustrated the impact on poverty of well-targeted microcredit. A World Bank study in Bangladesh found that the rate of poverty among members of three of the largest microfinance organisations fell by 20 per cent between 1992 and 1999 and that at least half of the reduction in poverty was due to microfinance. To build on the success of the Microcredit Summit Campaign so far, supporters of the campaign have agreed on two new goals: firstly, to ensure that 175 million of the world’s poorest families, especially the women of those families, are receiving credit for self-employment and other financial and business services by the end of 2015; and, secondly, to ensure that 100 million of the world’s poorest families move from below $US1 a day to above $US1 a day by the end of 2015.

Having 100 million families move above the absolute poverty line will benefit about 500 million people, going a long way towards achieving the millennium development goal of reducing by half the proportion of people living in absolute poverty. However, aid to microcredit still has a role in assisting newer microfinance organisations to build up their borrower numbers and systems to serve and monitor the progress of borrowers. The World Bank estimates that total assistance for microfinance is between $1 billion and $1.25 billion per year. This level of support will need to increase to ensure that the new goals for the Microcredit Summit Campaign can be achieved.

Australia’s aid for microcredit in the last few years has been just over one per cent of this global total, while Australia contributes about two per cent of all international development assistance. This implies that Australia gives a lower priority to microcredit than do other donors. For every dollar the current government allocates in overseas aid, only half of one cent is currently going to microcredit programs. As the government has indicated it will increase total aid to $4.3 billion by 2010-11, doubling the allocation for microcredit from 0.5 per cent to one per cent would take aid for microcredit to about $40 million per year, compared with $11 million to $12 million per year in the last two years. Doubling the share of Australia’s aid devoted to microcredit would demonstrate that this government recognises the importance of microcredit in reducing poverty.

World Bank research in 2004 clearly demonstrated that reaching down with financial services to people at the bottom levels of society is a powerful driver of poverty reduction as well as economic growth. Expanding microcredit funding within our aid program is critical. Enabling existing mainstream financial institutions to reach poorer clients will help. More importantly, donor partnerships with small microcredit institutions dedicated to reaching very poor clients can help them build sufficient scale to cover costs so as to continue without the need for ongoing grant funding.

Given that the majority of the world’s poorest people live in the Asia-Pacific region, and that many of these people lack access to credit and other financial services, it is essential that the government negotiates with developing countries to make access to these services a higher priority within the programs for each country. (Time expired)

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