Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Hansard source

Labor believes Australia should be a leader on development issues. Australia’s development assistance has lost its focus on poverty reduction, as an independent OECD report has confirmed. We believe Australia’s development assistance should have one clear purpose: to work in partnership with developing countries to substantially reduce poverty. Global poverty is a leading source of international insecurity, with high levels of poverty linked to political and economic instability, human rights abuse, unrest and war, uncontrolled migration and population growth, and environmental degradation. Labor believes that helping to reduce extreme poverty is not only the right thing to do; it is in Australia’s national interest.

Australians will benefit from a more secure world, which will only be achieved when fewer people face desperate circumstances and appalling living conditions every day. Microcredit is a critical tool in the fight against poverty. It is not a ‘silver bullet’ solution to end all poverty, but it is one tool that can be used in the fight against poverty. It works especially well in rural communities and especially for women. The provision of microcredit—very small business loans to help start or expand small businesses—has proven to be particularly effective in enabling very poor people, estimated at around 1.2 billion worldwide, to lift themselves out of poverty. Microcredit is one of the most powerful tools to address global poverty, building self-esteem and self-sufficiency in the institutions providing the financial services. It works in synergy with other development interventions, including those that promote health, nutrition, democracy and education, and offers a hand-up, not a handout.

The scaling up of microfinance is essential to reaching the Millennium Development Goals. If microcredit facilities were available to 175 million poor people, the world could be halfway to halving world poverty under the Millennium Development Goals. But the Australian government committed only 0.6 per cent of its total aid budget to microcredit schemes in its 2005-06 aid budget. The United States has recognised the value of funding microcredit schemes by setting a benchmark of 1.25 per cent of its aid budget. Australia should at the very least match this figure. Such a modest increase would greatly improve the chances of reaching the target set by the Millennium Development Goals to halve the number of people living on less than $1 a day by 2015. The Howard government needs to lift its game by increasing its commitment to microcredit schemes. By improving financial access for the very poor of the world, we are giving not a handout but a hand-up.

Since its inception 30 years ago the microcredit industry has taken off and is capturing the attention of the mainstream banking industry. However, despite increasing interest from the private sector, it still needs the active support of government. While government-to-government assistance is and will continue to be important for building capacity in developing countries, development assistance given directly to individuals, families and microenterprises at the grassroots level—for instance, through microcredit schemes—has been found to be one of the most effective mechanisms for reducing poverty.

Kofi Annan has said that microfinance helps alleviate poverty by generating income, creating jobs, allowing children to go to school, enabling families to obtain health care and empowering people to make choices that best serve their needs. Comprehensive impact studies have demonstrated that: microfinance helps very poor households meet basic needs and protect against risks; the use of financial services by low-income households is associated with improvements in household economic welfare and enterprise stability or growth; by supporting women’s economic participation, microfinance helps to empower women, thus promoting gender equity and improving household wellbeing; for almost all significant impacts, the magnitude of impact is positively related to the length of time that clients have been in the program. We can obviously see the benefits of microcredit.

However, the demand for microfinance services is largely unmet. Estimates of the global demand range from 400 million to 500 million households, of which only around 30 million were reported to have access to sustainable microfinance services in 2002. Although many poor and low-income people do not yet have access to financial services, the number of customers that use microfinance has grown between 25 and 30 per cent annually over the past five years.

Microfinance programs have generally targeted poor women. By providing access to financial services only through women—making women responsible for loans, ensuring repayment through women, maintaining savings accounts for women and providing insurance coverage through women—microfinance programs send a strong message to households as well as to communities.

In South Africa, studies showed that over a two-year period levels of intimate-partner violence were reduced by 55 per cent in a group of women who received microcredit. Microfinance, which includes the provision of all financial services, needs to be increased to poor communities as well. In Bangladesh, microcredit provided through AusAID has helped almost 26,000 women from the impoverished north-west region to help themselves and their families by providing access to credit and savings services. Under this program, poor women become small-scale entrepreneurs, investing in businesses such as poultry and livestock rearing, rice processing, fish farming and transport services.

I call on the Howard government to act now and increase Australia’s funding of microcredit programs to at least 1.25 per cent of our foreign aid budget. Anything less is just an abrogation of our responsibilities in the region.

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