Jason Wood (La Trobe, Liberal Party) Share this | Link to this | Hansard source

I move this motion to urge the Australian government to send the appropriate minister and appropriate shadow minister to lead an Australian delegation to the Asia-Pacific Regional Microcredit Summit in Bali in July 2008. I have spoken previously in this place about the importance of microcredit. In 2006 I spoke in support of a matter of public importance raised by the member for Kingsford Smith calling for the Australian government to set the goal of 175 million people receiving microcredit by 2015 and increase microcredit funding to 1.25 per cent of the Australian aid budget.

Last month I was approached by RESULTS Australia to keep the issue of microcredit moving. I thank and congratulate them for their advocacy on such an important cause and their persistence in keeping it a regular part of the national debate. Specifically I would like to mention the RESULTS Australia staff, including national manager Maree Nutt, research coordinator Mark Wright, president Ian Sampson and my local RESULTS members, Emmanuelle Emile-Blake and Anne Herbert, who visited me with photographer Damien Schumann, who is from South Africa.

Microcredit is the provision of low-interest loans and other financial services such as savings and insurance to impoverished people unable to borrow through ordinary channels. These loans enable borrowers in poverty to expand or establish small businesses like waste recycling and animal husbandry. Evidence from many microfinance programs around the world indicates that borrowers can profoundly improve the quality of their lives and futures of their children. Extra money earned is used to obtain better food, housing and education. Microcredit projects supported by the Australian government through AusAID have helped tens of thousands of poor households in countries like Bangladesh, China, Indonesia, Papua New Guinea, the Philippines and Vietnam.

It has also been an extremely effective strategy elsewhere. The Microcredit Summit Campaign launched in 1997 had the original goal of ensuring that 100 million of the world’s poorest families, especially the women of those families, had access to credit and other financial services by the end of 2005. By December 2006, the campaign had just fallen short of this goal: 93 million of the poorest families had access to credit at this time, which is still a fantastic effort. Nevertheless, the number of the poorest families with access to credit has increased twelve-fold, or 32 per cent per year, from 1997 to 2006—a tremendous effort.

Each year the civil society driven Microcredit Summit Campaign has tracked its own progress. This year reports found that in 2006 alone 133 million families received a microloan and 93 million of those families were among the world’s poorest people—people like Joyce Wairimu and Wilson Maina from Nairobi, Kenya. Eight years ago Joyce was a beggar in one of the world’s slums in Nairobi. Her climb out of poverty started with the loan of less than $30. She used the loan to start a small business to earn an income. Today she has six businesses and 62 employees. Wilson Maina was one of the most wanted criminals in the same Nairobi slum as Joyce. He has borrowed 17 times from a microfinance organisation known as Jamii Bora, meaning ‘Good Families’. Since his first loan of $25, he now has four businesses and has convinced hundreds of young men not to get involved in crime.

These are but two of the stories from microfinance organisations. Jamii Bora’s work was highlighted in the recent report from the Microcredit Summit Campaign, a project of the US based RESULTS Educational Fund. In 2006 the campaign adopted phase 2, involving additional goals to ensure that the expansion of microfinance leads to significant reductions in poverty. The first new goal is to further expand the number of very poor borrowers to 175 million by 2015. The second goal aims to ensure an additional 100 million families, which were among the poorest in 1990, have moved to above US$1 per day by 2015.

This goal will make a significant contribution to achieving the first of the Millennium Development Goals, to reduce absolute poverty by half by 2015. I believe it is vitally important that the new Labor government support the achievement of these goals going forward. The focus of the Microcredit Summit Campaign is on ensuring that the growth of microfinance both targets the poorest people and includes regular monitoring of how many borrowers are moving above the poverty line. Already 15 microfinance organisations and networks, mostly in Asia, have committed to measuring accurately the number of their borrowers moving above the poverty line in the period to 2015.

It is important for countries providing aid to microfinance, such as Australia, to increase funding to enable the expansion of newer microfinance organisations and the accurate measurement of how many borrowers are moving out of poverty. The Asia-Pacific region contains 64 per cent of the world’s population who live in absolute poverty, and as such it has a large unmet need for credit and other financial services. The Bali summit is a significant opportunity to examine ways to expand the use and effectiveness of microfinance in the region and to realise the government’s policy objective of reducing poverty in the Asia-Pacific region.

2006 Nobel Peace Prize winner Muhammad Yunus, who founded the microlending institution Grameen Bank, will be attending the Bali summit, as will leaders and innovators in the field of microfinance including those from Pakistan, Bangladesh, Samoa, Vietnam and Indonesia. Moreover, there are speakers from the World Bank and the commercial banking sector. It is therefore very important that the Australian government is represented at this forum to engage actively in the lively debate about microcredit, which is bringing poor people across the world renewed hope and is gathering momentum in its fight against global poverty.

The Nobel Peace Prize highlighted that financial services for the poor are an important part of the tool kit for enabling poor people to improve their lives. These services include affordable and collateral-free credit, safe and flexible deposit taking and microinsurances against illness, death and natural disasters. There is no question that microfinance has captured the interest of philanthropists and financial institutions. Bill and Melinda Gates, eBay founder Pierre Omidyar and—closer to home—banks like ANZ, NAB and Westpac have made considerable investments in this area. But, as financial services to the poor become good corporate business for some, the Microcredit Summit Campaign has continued to urge microfinance and mainstream institutions to also reach down to poorer clients. These are clients whose families are on less than US$1 a day and whose children are likely to be the faces behind the daily statistics of almost 30,000 of them dying from poverty related causes, which is an absolute tragedy and involves sadness we in this country just could not imagine.

It remains to be seen if the Rudd government will facilitate the long-called-for expansion of microfinance in our overseas aid budget programs and take up the additional challenge, as the US has in its aid program, of also reaching down to the poorest families. As stated in this year’s Microcredit Summit Campaign report, it remains to be seen if new World Bank President Robert Zoellick will heed the recent request from the US Congress to increase World Bank spending on microfinance and ensure that half of this funding reaches those living on less than US$1 a day. Over 1,000 parliamentarians across seven countries, including Australia, had the same request ignored by both of Mr Zoellick’s predecessors.

Critics of microfinance for the very poor cannot argue with the outcomes from Jamii Bora—from 50 beggars in 1999 to 170,000 savers and 60,000 borrowers in just eight years. If countries like Australia participate in the promotion of microcredit, the end of extreme poverty in our lifetime may well be within our sights. Once again I urge the Australian government to send the appropriate minister and appropriate shadow minister to lead an Australian delegation to the Asia-Pacific Regional Microcredit Summit in Bali in 2008. Again I thank all the other members who will be speaking on such an important motion today.

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

In seconding this motion by the honourable member for La Trobe, I would like to explain to the House why I believe microcredit is such an important tool in our aid program and why it is so important that the Australian parliament is represented at the forthcoming Asia-Pacific Regional Microcredit Summit in Bali. I am sure many members of the House will have some knowledge of microfinance programs and of their small low-income component, commonly referred to as microcredit. Members may also be aware that Australia supports various microfinance programs through its overseas aid budget in places like Papua New Guinea and Vanuatu.

Microcredit has proven itself to be one of the most effective tools available to break the cycle of absolute poverty that exists in so many countries of the world. Its value has been recognised by the numerous international financial institutions referred to by the honourable member, including the World Bank, which has introduced microcredit as part of its lending program. The effectiveness of microcredit and its contribution to mankind have been recognised through one of its earliest pioneers, Professor Muhammad Yunus of the Grameen Bank in Bangladesh, being awarded the 2006 Nobel Peace Prize.

Australia has partly funded a very successful microcredit project in Vanuatu. The project started in 1996 and goes by the acronym VANWADS. It serves over 3,000 women and is currently expanding its services to the outer islands of Vanuatu. It now earns enough income to cover its operational expenses and no longer needs to rely on donors to continue funding its services—and that, ultimately, is the very aim of the microcredit system. Its effectiveness, and the effectiveness of microcredit, is probably best illustrated by a group of five of its female borrowers. The women borrowed small amounts of money over a three-year period to start and develop various small enterprises, including a retail business, a sewing business, a kava store, a DVD rental business and a minibus. Their businesses allow them to now generate a sufficient income to meet their families’ basic needs. However, the women believe that the greatest impact of microcredit has been the opportunities it has helped create in their lives. Their confidence and belief in themselves grew beyond that which they thought possible. In the words of one of them: ‘Now I am strong. I am really, really confident.’

These examples of success which have been achieved through the microcredit programs are not isolated reports. Rather, they are the rule in well-run projects in many countries in Africa, Latin America, Asia and parts of Europe. Microcredit enables the cycle of poverty to be broken, because the family income increases to the point where the children are educated, fed more nutritious food and provided with basic health care, things we take for granted. It is more likely that the children in those families will go on to earn an income that will in turn enable them to better provide for their families and make a greater contribution to the social and economic welfare of their communities.

Microcredit has a strong connection with the United Nations Millennium Development Goals that were agreed to in September 2000 by all members of the United Nations, including Australia. There are eight development goals that respond to the world’s main development challenges through a set of targets for growth, poverty reduction and sustainable development. Microcredit is an important part of that great jigsaw puzzle.

The Treasurer’s recent budget indicated a considerable increase in support for the Millennium Development Goals, and I congratulate him for that. I think we should recognise that, as Parliamentary Secretary Bob McMullan pointed out on 23 May in his speech to the University of Adelaide, our budget of 2008-09 increases support to $3.7 billion, or 0.32 per cent of GNI. I know that is not enough, and he recognised it. In fact, our contribution—not just the contribution of this government, but our history of contribution—is quite disgraceful. Frankly, I think we all recognise that. We are a wealthy country and we can do a lot more. I think we would all acknowledge that still more needs to be done if the targets associated with the goals are to be genuinely met, and certainly the parliamentary secretary made that clear. It is especially relevant for Australia to focus on the Millennium Development Goals as they relate to the Asia-Pacific region in particular. This region contains about 64 per cent of the world’s population who live in absolute poverty on less than $1 a day.

The region has a large, unmet need for credit and other financial services as well as numerous organisations that have a strong track record in providing the poorest people with access to credit. One of those institutions is the Grameen Bank, which is one of the world’s leading microcredit providers. Whatever people may say about this system—and I have heard financiers and other banks talking about needing to broaden it and so forth—it is a significant contribution to the lives of individual people.

A concrete way that we can show the world and our Asia-Pacific neighbours in particular that the Australian parliament is serious about achieving the millennium goals is to promote a greater understanding of microcredit and its adoption in poor communities of the region, notwithstanding critiques of this particular system that exist. Whilst there is consensus on the importance of increasing the poor’s access to financial services, achieving this at scale and on a sustainable basis requires a broad focus on the financial sector, including but not limited to—and we understand this—support for microfinance.

The Australian government’s aid program has supported microfinance, including microcredit, and there are differentials in that, as one way of reducing poverty and promoting broad based economic growth. The Australian aid program—not just under us but under the former government—has committed an average of $10 million a year in direct support for microfinance initiatives over the last eight years. AusAID is currently exploring programming options to increase the number of poor people accessing financial services and to provide more choice in products and providers. No predetermined funding target has been committed to for such activities.

The Asia-Pacific microcredit summit in Bali on 29 July to 30 July this year offers a concrete means to help foster microfinance in the developing world. The microcredit summit goal is for 175 million of the world’s poorest to be receiving microcredit by 2015. If that goal were met then a large proportion of the Millennium Development Goals target to halve the number of people living on less than $1 a day would be achieved. But that is only half, which is extraordinary. When you listen to yourself talk about this you realise it is quite disgraceful.

We have an important opportunity before us right now to realise a major global achievement in relation to poverty eradication. Now is the time for us to push hard on those means that will enable us to achieve it, like microcredit. That is why I am very pleased to second the member for La Trobe’s motion. I thank him for it, and I also thank RESULTS Australia, particularly Ian Sansom, who resides in my electorate and happens to be president. They are very dedicated to this and they will not rest—and I thank them for it.

By sending the relevant government minister and his counterpart from the opposition to the microcredit summit in Bali, we indicate our strong and united support for the Millennium Development Goals—they are so crucial—and for the wider use of microcredit as a significant means of achieving the poverty eradication targets. I understand from the Parliamentary Secretary for International Development Assistance that the Australian government is likely to be represented at the conference, which is great; it is terrific. No doubt they are working on the other side to make sure the relevant person or persons go—and hopefully the member for La Trobe will be attending as well—and our government will give consideration to the appropriate level of representation closer to the summit. I truly do hope we have strong representation there. Be not confused about this: the Australian government is dedicated to improving the proportion of development aid from our national income—and so we should be. I thank the member for moving the motion.

Alex Hawke (Mitchell, Liberal Party) Share this | Link to this | Hansard source

I want to firstly congratulate the member for La Trobe and indeed all members who are supporting this fine motion. Since the United Nations 2005 International Year of Microcredit, the microfinance program has become one of the most significant global economic programs in alleviating poverty. The public awareness that was created from this international year was followed by Bangladesh economist Muhammad Yunus and his Grameen Bank winning the Nobel Prize for pioneering the use of microcredit. As many members have now noted, Muhammad Yunus will be one of the experts who attends the summit in July.

Although the Rudd government recently increased the Australian aid budget to $3.7 billion, if we are serious about eradicating poverty globally we need to invest more time and greater resources in promoting economic programs such as microfinance. The causes of poverty in our world today are vast and well known. They include corruption, trade barriers, poorly developed legal systems and property rights, appalling infrastructure, coupled with malnutrition, disease, lack of sanitation and drinking water, and illiteracy. Many of these problems are not addressed by traditional programs to alleviate poverty. Indeed, if you want to achieve an end, you must consider the means. If you want to achieve a goal, you have to know how you are going to get there. Microfinance answers some of those significant questions about how we are going to alleviate poverty. It is particularly the most disadvantaged people in non-industrial economies who benefit the most from microfinance programs.

International Finance Corporation figures for 2007 report that women represent 47 per cent of borrowers, which is extraordinary in the context of the countries that we are considering. These programs represent the long-term good, enhancing the traditional models of charity. They do not create welfare dependency. They give pride of ownership in an enterprise and skills to serve in future successes and future failures. One of the important aspects of microfinance is that it is cost-effective, it is self-regulating and indeed it builds a sense of community. Experience has shown that there is pressure from friends and neighbours to pay back the loans so that other people themselves can then obtain those microfinance loans. Experience tells us that it is one of the most effective measures available to us today.

This measure is also very important to our region. As noted previously by some members, we live in a region where there is enormous poverty. Indonesia has 20 million people living below the poverty line—one person for every Australian citizen. Case studies on microfinance in Indonesia showed that borrowers increased their incomes by 12.9 per cent, whilst a control group showed growth of only three per cent. These programs work, again, addressing the important question: how do you achieve the ends that you are seeking? With respect to Indonesian microfinance loans to people on the island of Lombok, for instance, it was reported that clients increased their incomes by 122 per cent, and nine out of 10 recipients moved out of poverty. That is absolutely amazing empirical data on the success of these programs.

An eight-year study in Bangladesh showed that, amongst the poorest in the country, only four per cent were able to rise out of poverty without any assistance. Figures obtained from the Grameen Bank show that microfinance borrowers were escaping poverty at a rate of 48 per cent.

On 29 June 2007, the International Finance Corporation invested $3 million in microfinance programs for Papua New Guinea, piloting what will be important microfinance initiatives in that country. This is a regional leadership question and Australia needs to be at the front. There is no doubt that further study and consultation needs to take place in order to ensure a reliable distribution system is developed and that systems are put in place to ensure that products created by the microfinance program actually reach the market. This is one reason why it is so important that we do participate in Bali in July and that we give serious consideration to our delegation representation.

Microfinance also provides a big opportunity to improve our Indigenous communities. Our governments must consider that one of the major problems facing Aboriginal communities participating in the economy is access to capital. Any program that can be shown to demonstrate an improved access to capital and which can alleviate poverty must be considered in improving the lot of Indigenous Australians.

As the government of the leading economic nation of the South Pacific, the Australian government does need to take the initiative in this area, and attendance at the Asia-Pacific Region Microcredit Summit in Bali will be a significant step in this process. The conference will be attended by many of the leaders, some spoken of here and many not mentioned. But, if we are seeking a goal—and we are all seeking the same goal—to alleviate poverty and pull people out of poverty, we have to consider the means and how best we can achieve that. Microfinance has been demonstrated to be one of the most effective economic programs in the world today and there is every reason why we should be participating in the summit in July.

Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

The issue that the member for La Trobe raises is an interesting one and it has been around for some time; however, my interest is in its application in Australia. Already we have some development of microcredit in Indigenous communities, as can be seen in Siobhan McDonnell’s Giving credit where it’s due. In her discussion on the operation of microcredit models in Indigenous Australian communities, she states:

Micro-credit is one model which may enable Indigenous people, and in particular women, gain access to credit. It is the extension of small loans of amounts of less than $25,000 to entrepreneurs too poor to qualify for commercial lending. The aim of micro-credit lending is to provide credit to entrepreneurs who do not have access to credit from other private or government sources. By targeting women, immigrants, welfare recipients, Indigenous people and low-income earners, micro-credit loans serve a client base that has been rejected by the formal banking sector.

She explains:

The term micro-credit is used in two different contexts. First, as the process of lending small, short-term loans to individual borrowers for self-employment projects. Second, as a program which also incorporates a ‘peer-group lending model’. In the peer group lending model, borrowers form groups of approximately five borrowers. Each borrower is held accountable, as a guarantor, for each of the other borrower’s loans. If one borrower defaults the group as a whole must repay the loan. The process of borrowers forming groups by choosing their group members has been found to reduce the credit risks associated with lending and provides a mechanism for ensuring that loans are repaid such that it is financially viable (ie the micro-credit fund records a high repayment rate on loans).

In 1997, James Evans from First Business Finance Australia wrote:

Microcredit has international currency. European and North American countries regularly use the term, both in government policy formulation, and in their approach to lending. It is also successfully established in developing countries, most notably in Bangladesh where last year the Grameen Bank alone lent US$380 million; average loan size $100, and a repayment rate in excess of 98%.

There have been examples of microcredit schemes in communities around Australia. Small credit unions, revolving community loan funds and similar mechanisms have come and gone over the years. Indeed, the creation of the first Australian Credit Unions fifty years ago were in part a response to the needs of “modest farmers and small business folk”.

So far there has been one over-riding problem with these commercial microcredit initiatives. They have been local and small. In an informal survey of twenty microcredit providers around Australia in 1994, the author found that not one had disbursed more than five business loans in the previous year.

So it is all well and good to support the microcredit movement overseas. I know that many in Australia feel this is a good way of supporting developing nations, helping them to help themselves in simple ways. But why aren’t we doing it here? In one sense, the NEIS allowed many people to use their unemployment benefits to start up, and there have been schemes like Young Aussie, where young people are able to start their own business under the umbrella of the Young Aussie scheme until they are ready to go it alone. Now we need some method of loaning small amounts to people who want to start up in a very small way. Banks are not equipped to do this sort of thing. As Evans says:

There is little dispute about the most common reasons for the difficulties that very small, often young, businesses have finding suitable debt finance (Time expired)

Scott Morrison (Cook, Liberal Party) Share this | Link to this | Hansard source

I rise to join the chorus of support for this motion and I commend the member for La Trobe and the other speakers for their support of it. Global poverty is the true moral crisis of our age. We have the resources to fix it. The question is: will we? We must deal with the gap in world aid funding and live up to our commitment to the Millennium Development Goals to deliver 0.7 per cent of our gross national income by 2015. I note the comments by the member for Braddon and I agree that we need to do a lot more, but I commend the government for that one item in the budget.

We must continue our program for the relief of developing world debt. We must definitely take major strides towards overcoming the crippling impact of corruption that is stealing the future of developing countries. This must have a far higher priority than it currently does in global institutions. We must understand that making poverty history is not just about turning up to rock concerts, wearing armbands and complaining about our governments. We must accept personal responsibility for the more than one billion people who live on less than $1 a day. We can all give.

We must provide those in developing countries with the tools to take ownership of their future. That is where microcredit has such a significant role to play, as we have heard. As the former UN Secretary-General Kofi Annan said:

With access to microfinance … people can take real strides towards breaking the vicious cycle of poverty and vulnerability.

The Asia-Pacific Regional Microcredit Summit in Bali is part of the Microcredit Summit Campaign that is working to ensure some valuable goals in this area. This is a worthy initiative that deserves our support through participation.

Australia has a proud history in the development of microcredit and of microenterprise development more broadly. In 1974, following Cyclone Tracy, David Bussau took a volunteer construction team to Darwin to help rebuild the city. In 1976 David was called upon again to help a small rural village in Indonesia devastated by an earthquake. David took his family to live with the villagers and help rebuild their lives. As he applied traditional solutions—re-establishing water supplies, repairing bridges and roads and rebuilding schools—he gradually realised that sustainable development needed more than just infrastructure. This traditional approach still left poor families trapped in poverty. David’s solution was microfinance and enterprise development.

A struggling Indonesian farmer received the first loan from David. That loan of $50 enabled him to buy a sewing machine and start his own tailoring business. Today he runs an import-export business and owns a fleet of taxis, providing a wide range of employment for his local community. David provided finance to a further 20 people, achieving dramatic results. These flourishing small businesses not only provided for the basic needs of poor families; they also gave the entrepreneurs confidence, dignity and self-respect. David was inspired. He sold his businesses and established the Maranatha Trust to provide small amounts of capital to poor people so they could become entrepreneurs in their own environment.

In 1979 David Bussau joined forces with the late Al Whittaker, who had been piloting the Trust Bank group lending methodology in South America. In 1992 they began to test the Trust Bank program in the Philippines. In 1998 they linked together with partners to form the Opportunity International network. With more than 200,000 clients in 2000, Opportunity International began to establish formal financial institutions which take the form of commercial banks, development banks or credit unions. David Bussau is Australia’s Senior Australian of the Year this year.

Today, the Opportunity International network has support partners in five countries and 44 implementing partners in 27 developing countries. Opportunity International has over a million active clients globally and a loan portfolio of $539 million with an average loan value of just $245. Women account for 84 per cent of its clients, and there is an average repayment rate of 97 per cent. At present, the key focus of Opportunity International in Australia is in India, the Philippines and West Timor in Indonesia.

At this time I would also like to acknowledge the work of the recently retired CEO of Opportunity International in Australia, Paul Peters. During his 4½ years as CEO, Paul built a strong team, expanded the group’s strategic partnerships and raised over $60 million. Paul demonstrated a real heart for the poor and took the organisation to yet another high level.

Yet microcredit does just not present opportunities we have already heard about in overseas countries; we can apply these models right here in Australia and there has been plenty of work done on that project. I would like to draw attention to the work of Leigh Coleman, who, as one of David Bussau’s early pioneer directors and field leaders for Opportunity International, is now working in micro-enterprise development in Aboriginal communities with the support of Mission Australia. David Bussau’s work, Leigh Coleman’s work, the work of Opportunity International, displays a proud heritage for microcredit in this country and, as a result, I think together we have a lot to contribute to that conference in Bali. Together with the previous speakers, I commend the motion.

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

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