Introduction
Microfinance still rides high on the agenda of governments, practitioners and international donors as an efficient tool with the ability to adequately help reduce the measure of extreme poverty that exit in most developing economies. This is partly so because finance is a key element needed in addressing various developmental challenges. For example poverty reduction strategies, rural development, food security strategy, etc all need some level of financial interventions and sound financial systems or intermediaries to efficiently address these known challenges.
The Millennium Development Goals (MDGs)
In 2000, world leaders adopted the United Nations Millennium Declaration(Millennium Development Goals ) at the Millennium Summit of the United Nations. This according to experts captured the aspirations’ of the international community for the new century. The declaration signified a world that was united by common values and striving with renewed determination to achieve peace and decent standard of living for every man, woman and child(UNDP, 2010).
The Millennium Development Goals (MDGs) aims at eradicating extreme poverty and hunger, achieve universal primary education, promote gender equality and empower women, reduce child mortality, improve maternal health ,combat HIV/AIDs, malaria and other diseases, ensure environment sustainability and develop global partnerships for development.
According to the UNDP report (2010), Ghana is the first country in sub Saharan African to have achieved the MDG 1 that aims at eradicating extreme poverty and hunger. This according to the report was achieved mainly by the significant improvement in economic growth over the past decade with accompanied sound social economic policies on poverty reduction. It further indicated that the establishment of the capitation grant, school feeding and the livelihoods Empowerment against Poverty Programme(LEAP) were all initiatives that partly contributed to the achievement of MDG 1. There are further indications that the Ghana is on track to achieving all the other MDGs except for MDGs 4 and 5 which is aimed at reducing child mortality rates and reducing maternal mortality rates respectively.
Microfinance contribution to the achievement of the MDGs
It is important to point out the fact that long before the world leaders came together to agree on common grounds to fight poverty, individuals like Dr Yanus the acclaimed “father of microfinance” had taken the lonely road to provide a formula to help reduce the incidence of poverty in far away Bangladesh. This approach was to enable the poor, unbanked and the under banked individuals to take advantage of economic opportunities by accessing financial assistance in the form of loans or credit. The impact of these initiatives have now received world attention and more microfinance institutions are finding more innovative ways of reaching the poor all over the world with the needed financial resources in a more efficient way.
The MDGs as they stand can equally fit for the definition of poverty. The objective of the MDGs therefore falls in line with the objective of microfinance which intends to improve the livelihoods of the poor. From this analysis therefore, efficient and home grown microfinance methodologies can be employed to adequately help achieve the various MDGs in a more sustainable way.
For instance access to health care for pregnant poor women may not be the main or only reasons for high maternal and child mortality rates but the cost of receiving the health care, educational levels of the mothers, the money needed to purchase the needed drugs and cost of nutrition may be contributing factors leading to high maternal and child mortality rates. It is a fact that Governments have the main responsibility of providing the needed infrastructure including hospitals or health care centres. However most poor citizens have to pay for the cost of accessing these facilities . In the case of Ghana, the cost of receiving health care for children and pregnant woman is currently been addressed by the National Health Insurance Scheme (NHIS). The fact remains that money needed by these poor households to improve on their children nutrition largely depend on the income levels of the poor parents and this is what microfinance seeks to do; that is to financially empower its clients to enable them finance their needs. Access to quality health care to the poor cannot be overemphasized but a household without an improved income levels stand the higher probability of not having quality nutrition which can delay the achievement of the reducing high maternal and child mortality rates.
In another example, if reducing extreme poverty was achieved partly due to the provision of the capitation grants, school feeding programmes and the LEAPs , then further reduction of the poverty in Ghana can only be sustained by the ability of the government to continuously budget appreciable amount of money for these activities. This therefore implies that any reduction in the amount for these interventions by the government of Ghana due to the rationing of its resources can rob the country of some of the achievements gained under the MDGs. Alternatively employing efficient microfinance strategies by all stakeholders including Government can help in the achievement of the various MDGs in a more sustainable manner since funds disbursed to the poor under microfinance are meant for economic investments that will grow to support their consumption needs rather than just concentration on grant disbursements for consumption purposes only.
Microfinance focuses on self empowerment and ensures that clients’ capacity to effectively utilize financial resources is built and further educated on relevant socio- economic issues in basic financial management, family nutrition, pre and post maternal care, responsible sexual life, leadership skills, etc to ensure positive behavioral changes which are highly needed to achieve the overall objective of the MDGs.
Governments of developing countries have major roles to play in ensuring the overall improvement in the lives of its citizens. However in respect of the major governmental role , a critical analysis of the MDGs reveals that a well laid out microfinance programme can aid and help in the achievement of the various goals along side government and donor efforts in a more sustainable and efficient manner . This is because the new era of microfinance does not only focus on the granting of loans but goes beyond the provision of financial and non-financial assistance that include, savings, microinsurance, adult education, money transfer, etc. It further provides poor clients with the opportunities to get involve in achieving the various goals rather than only leaving it as the responsibility of donors and governments.
Microfinance from what have been achieved can lead to the reduction of extreme poverty by ensuring to provide not only the needed capital but also non-financial assistance which is much needed to ensure maximum utilization of the funds they received. A World Bank report study in 2005 concluded that more than half of the poverty levels reductions for poor clients in three Bangledeshi microfinance institutions could be directly attributed to microfinance. Bastelaer and Zeller(2006) also indicated that microfinance has impacted greatly on extreme poverty than on moderate poverty. There is therefore the need for all interested in fighting poverty to look at strengthening microfinance institutions including rural banks in the case of Ghana in order to further reduce the incidence of poverty and all its characteristics as represented by the MDGs. There are several impact studies that have shown that microfinance programs have indirectly improved the nutrition of the beneficiary households and increase the number of children enrolled in school by some poor households.
Conclusion
In summary effective microfinance programmes ensures that clients are educated on issues that all are enshrined in the MDGs and further provide them with the means to to take advantage of economic opportunities in order to enable them finance their health nutritional, educational and other needs of the poor clients. It further educate clients to be responsible towards the environments by developing and marketing alternative livelihood programmes that take clients away from the dependency on the forest into economically and environmentally friendly activities. It also ensures that clients understand basic business and financial management to guarantee efficient usage of the financial assistance which may be missing in government current approaches in fighting poverty. The other benefit of microfinance towards the achievement of some of the MDGs is the sustainability of the approach compared with the distribution of grants which has several histories of various challenges that tend to undermine the efficacy and efficiency of the programme. It is also important for development actors to note that women empowerment is best achieved when women receive information through education and when they are able to contribute financially towards the upkeep of their families. Women clients of microfinance programme can attest to the fact that they have gained more respect from their husbands and are being treated with respect when they started contributing financial support to their households. This therefore indirectly gives them a say on issues concerning family planning, educational investment of their children and other issues that can help contribute to the achievement of the MDGs in order to improve on livelihoods of the world poor people.
As the world still searches for ways to improve the livelihoods of the world’s poor, microfinance comes in as “handy tool kit” that has been tried and tested over the years and have proven to possess the ability to help in the realization of the dreams of the world leaders captured in the MDGs ten years ago.
BY
RODERICK OKOAMPAH AYEH
MICROFINANCE OFFICER
ARB APEX BANK LIMITED
