Harry Quick (Franklin, Independent) Share this | Link to 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)

Harry Jenkins (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

Is the motion seconded?

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

I second the motion and reserve my right to speak.

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

I am very pleased to speak on this important motion on microcredit moved by the member for Franklin and I want to acknowledge in the House that he is one member of parliament who has enormous respect and regard across the chamber. He is certainly a man of great heart and compassion, and this House will be the poorer on his departure from the parliament when the election is upon us.

The motion is really about eradicating global poverty. The world has some six billion people in it today, and over half that number, some three billion people, still live in abject, desperate poverty on less than $US1 per day. It is incumbent upon all of us in countries as privileged as Australia to do all we can to tackle the scourge of global poverty. That means trying to get clean drinking water to people who do not have it and trying to put food in the bowls of those people living in remote corners of the globe who do not have access to a good meal each day.

The Howard government is very much a supporter of tools to tackle global poverty such as microcredit. We do it in a number of ways. Our aid budget is one very significant way in which the Australian government tackles issues of global poverty, in particular poverty in our region. Australia will provide some $3.2 billion in official development assistance in the 2007-08 year, an increase over last year’s budget, which was $3 billion. You can always say that more can be done and you can always ask for more money and better ways of doing things, but this country—and certainly this government—is doing all it can to tackle the big issues that face us as a country and as a people.

The government, as I said, does support microfinance as an effective tool for reducing poverty and has invested an average of $10 million a year over the last eight years in direct support to microfinance. The Australian government’s white paper on overseas aid programs is very much focused on accelerating economic growth and supporting local communities to connect with private sector led rural and business development, which microfinance is very much a part of. We should continue to invest in a microfinance approach, which is specific to the people and customers it aims to help and to the unique market environment, particularly here in the Pacific. It provides support where the establishment of local financial services is most likely to deliver long-term results and meaningful outcomes, as opposed to the short-term results that aid programs usually provide. We have to try and focus on long-term solutions and on connecting people to a more sustainable recovery model. That is one of the great assets of microcredit as a tool.

Australia was, of course, represented at the Global Microcredit Summit in Canada in November 2006. This was a very important event and confirmed that some 100 million poor people are borrowers. We want to try to increase that number. The summit launched a new target of 175 million people in developing countries by 2015. Australian aid will continue to be part of the reach of microfinance, and I strongly support that. Expenditure on microfinance is expected to be some $10 million for the 2007-08 year. As I said, we can always do more. I understand this figure is not set in stone; we can increase that in conjunction with further discussions with the governments of the countries that we are trying to reach out to. (Time expired)

Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Link to 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.

Gary Hardgrave (Moreton, Liberal Party) Share this | Link to this | Hansard source

I thank the member for Franklin for moving this motion. He and I were here the day that the current Nobel Peace Prize winner, Muhammad Yunus, came to this place 10 or more years ago. None of the other members contributing to today’s debate have been in this place so long as to be able to make that claim. Muhammad Yunus, the Grameen Bank and the work of microcredit have been very familiar to the member for Franklin and me. Apart from my five-and-a-bit-year sojourn in the ministry, I have been very passionate about advocating for this. I know that the Minister for Foreign Affairs, Mr Downer, listened very closely to a number of us in the mid to late nineties when we went to see him about microcredit and said, ‘You’ve got to look at this way of making relatively small lumps of money available to those who are responsible and capable of doing something with it.’ That is what microcredit schemes have been about. The member for Chisholm outlined some examples of the way in which women, in particular, have been targeted in very poor countries such as Bangladesh, Cambodia, East Timor, Indonesia, Laos, Nepal, Pakistan, Papua New Guinea, the Philippines, the Solomon Islands, Sri Lanka, Thailand, Vietnam and various parts of Africa—the list is very impressive.

The government’s commitment to microcredit, whilst seemingly a small amount of money, has to be seen in the overall context of a decade of involvement in microcredit schemes. We have to look at the other things which should underpin the capacity to get a result out of microcredit and we have to make sure we have the building blocks that are needed to make it fully effective: macroeconomic stability; appropriate financial and legal systems; key infrastructure, such as roads and electricity; and health services.

I am greatly in debt to a bloke called Mark Rice, who has the job of research and advocacy coordinator for RESULTS Australia. He is a constituent of mine. I listen to my constituents and he put me onto this on virtually day one after I was elected in 1996. Mark’s claims are fair and reasonable. His challenge to the government is not just about doubling the amount of microcredit money that is available but also about looking at the growing burden of HIV-AIDS, TB and malaria in the South Pacific. Forty per cent of all new HIV infections by 2010 will be in that region, with an emerging epidemic in PNG. Indonesia now has half a million new TB cases and 100,000 deaths annually. I see that my colleague the Minister for Immigration and Citizenship is talking about a total ban on people with TB. He is talking about not bringing them into this country because of the Auditor-General’s report into some of the processes of the immigration department. We need to be very careful about those so-called total bans because, whilst we want our migrants to meet the health criteria, we also need to note that there are those who are going to come to this country and be able to be very productive despite exposure to those things. 1.9 million people are infected with malaria in Indonesia.

These sorts of building blocks are very important components in making sure that microcredit works well. I support the call from RESULTS Australia for a global fund to help fight AIDS, TB and malaria. They have already spent an enormous amount of money—not so much through RESULTS, but through a number of agencies. Some $8.8 billion in public and private moneys have been disbursed and monitored since 2002. But there needs to be a significant Asia-Pacific focus in these things. That way our microcredit contribution can find people with the health and also the focus to participate in these sorts of society-growing programs. If your main concern is the health of your kids and whether you are going to see the week out, microcredit is not for you, so it is absolutely important that we have those building blocks in place.

We also need to note that the results of the efforts in regard to this disease control has seen half a million people on antiretroviral treatments, TB treatments for 1.4 million people and bed nets delivered to more than 11.3 million people to prevent malaria. This sort of work in concert with the targeted work of microcredit schemes is going to make a difference and liberate our region. I believe very strongly that Australia has a long-term role to play in growing the educative and work readiness capacity of so many nations in our region. These are words I uttered when I was the Minister for Vocational and Technical Education; I am not going to walk away from them now. We have to make certain that people have the capacity to have that economic role in the region. Education, training, health and microcredit are all part of the way in which you build a strong and secure local region that Australia is a part of. Australia should not shut its doors and turn its way inwards; it should be part of that region in every possible way. (Time expired)

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

I would like to start by congratulating the member for Franklin on moving this motion. It is a very important motion that we are debating here today. It is a motion which calls on the Australian government to act on the goals it endorsed at the 2006 Global Microcredit Summit by doubling the proportion of aid Australia currently allocates to microcredit programs from 0.6 per cent to 1.25 per cent of Australia’s overseas aid budget.

Over the last 30 years, and certainly over the last decade, microcredit—or, more broadly, microfinance—has proven increasingly successful in helping some of the world’s poorest people lift themselves out of extreme poverty. Based on the idea that credit can be utilised as a powerful developmental tool, microfinance works by extending low interest repayment loans to people living in poverty. These loans can then provide them with the capital they need to start up or grow a small business. Microfinance provides some of the world’s poorest people with the means to become self-employed and economically self-sufficient. By extending credit and other financial services to those living in poverty, microfinance is a way of both transferring valuable resources to the people who need them the most and injecting new investment and new life into those areas of the economy that are usually starved of capital and left to stagnate.

Much of the success that microfinance has met with stems from the fact that both in philosophy and in practice it is built on the premise that the most successful development programs are those that empower the very people they seek to help. Throughout the 1970s, 1980s and 1990s, aid programs were often guilty of disenfranchising the communities they were supposed to be helping and of creating a climate of aid dependency. Aid programs tended to be imposed from above, rather than developed in consultation with local communities on the ground. Corruption was endemic and few programs were sustainable in the long term.

Microcredit is different in that its focus is on giving people a real, practical opportunity to help themselves. It is a model based on building direct relationships with the people it seeks to help. It funds programs that are more likely to be sustainable over the long term as small businesses begin to generate their own income. And by making self-employment possible, it helps build the foundations on which individuals can regain a sense of control over their future. As one constituent who wrote to me recently put it: ‘Give a man a fish and you feed him for a day, but teach a man to fish and you feed him for life.’

Of course that very much applies to women because they have been the greatest beneficiaries of microfinance. Today it is widely recognised that the most successful development strategies are those that focus on the participation of women precisely because the benefits that come with aid are much more likely to flow on to the rest of the family and to the local community. Women and children make up the vast bulk of the world’s poorest people. At the same time, women continue to face a number of specific obstacles that make it far harder for them to break the cycle of poverty. Some of those are traditional sociocultural constraints that limit their participation in the economy as well as their access to land, capital and resources. Microcredit programs are one way of helping to break this deadlock by providing women with the support they need to become economically independent.

Labor believes that Australia has a much more important role to play in the areas of international development and aid, especially among our regional neighbours in Asia and the Pacific. This motion is a small but important component of Labor’s overall aid and development framework. At present, Australia’s aid contribution lags far behind our comparative wealth. We are not doing enough, and we are not doing enough in the right areas. Microfinance alone will not eradicate world poverty, nor does it always lead to successful outcomes. But it does have an important role to play in helping us achieve the Millennium Development Goals, including halving extreme poverty by 2015. For this reason I am pleased to support this motion and to once again thank the member for Franklin for giving us the opportunity to raise this issue in the House today.

Luke Hartsuyker (Cowper, National Party) Share this | Link to this | Hansard source

I welcome the opportunity to address the House on the subject of microcredit, as I believe that this system of small loans, in one form or another, has great potential to alleviate poverty. Let me say at the outset that I concur with the good intentions of this motion from the member for Franklin. If microcredit is such a force for good then it would seem to follow automatically that the more money we devote to it, the better. Indeed, if one looks at the record of that pioneer of microcredit, the Grameen Bank, and its founder, Professor Muhammad Yunus, in Bangladesh, it would seem hard to argue the contrary. With more than seven million borrowers, more than 2,300 branches covering more than 91 per cent of Bangladeshi villages, and the recent award of a Nobel Prize, it would indeed seem to give force to the argument that more is better.

However, Professor Yunus himself cautions that microcredit has become a ‘buzzword’ and ‘has been imputed to mean everything to everybody’. Clarity on exactly what we mean by microcredit is essential, he says, to formulating the right polices and designing appropriate institutions and methodologies. In other words, one size does not fit all—what works in Bangladesh might not work in sub-Saharan Africa or in East Timor. The reason that Professor Yunus’s system of small, no-collateral loans worked in Bangladesh, apart from the fact that it was simple and brilliant, was that it was tailored to specific needs and the specific social structure. The principle that in order to get a loan the borrower had to join a group of borrowers worked in the context of Bangladeshi culture. Defaulting on a repayment impacted not only on a remote institution but on one’s peers in the village. Control and funds remained with the target clients—in this case, women. In a more male orientated society, this model may not work. Indeed, in any society, one can find institutions where control lies with those with high social standing but possibly without the skills or the good intentions to run an institution as intended. One has to consider the type of society one is dealing with. If we take the Grameen model as an ideal, with its underpinning of cooperative action and peer pressure, then should we try to impose that in countries or regions with small populations, sparsely populated regions or regions where travel between small centres of population is difficult?

Australia’s area of special interest is of course the Pacific region. Some form of microcredit may well bring benefits but, given the nature of the region, it is not likely to be in the form that works well in Bangladesh. Indeed, other forms of aid might be more effective. Also, it depends what you want to achieve with your aid money. If your aim is to alleviate personal poverty, and if you can find the right form of microcredit for the existing social set-up, then the initial Grameen model may well be appropriate. But look at its guiding principles. There are 16 decisions which borrowers are required to take. They relate, among other things, to maintaining houses, sending children to school, relinquishing dowries and keeping children and the local environment clean—all laudable aims, but they will not get hospitals built, nurses and doctors trained, roads constructed to get to the hospitals and so on.

Setting targets for a particular kind of aid, as the member for Franklin’s motion suggests, assumes that one can always find sufficient projects with the right recipients in the right conditions with the right social structures to make a success of that form of aid. With the best will, that might not be the case. It also restricts the flexibility of the aid budget overall.

I understand from the Minister for Foreign Affairs that neither Australia nor any other nation gave formal endorsement of the goal of the Global Microcredit Summit. That being the case, I believe that the government should continue to seek opportunities to finance appropriate microcredit projects as part of its aid program without being tied into the straitjacket that a particular target would represent. But, having said that, I must concur with the view that has been expressed by other speakers that the ability of microcredit to maximise individuals’ efforts and to empower them to succeed to lift themselves and their families out of poverty is a noble one—one that we should support. I welcome this motion being brought before the House.

Harry Jenkins (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired. The debate is therefore adjourned and will be made an order of the day for the next sitting.