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Access to finance ActionAid International programmes in India and Kenya have over 20 years experience of running micro-finance programmes. However, the vast majority of ActionAid's savings and credit programmes globally have been in operation for well under ten years. ActionAid undertook a review of its Micro-finance work in 2001. Financial services for the poor have proved to be an important development intervention in providing economic support to poor people's livelihoods. Micro-finance is a significant issue in the lives of people living in poverty. However, access to financial services remains a major problem for poor people, especially the most marginalized. For example, in Brazil, since 1985 the rural-credit squeeze and the end of subsidies has caused the disappearance of not less than 940,000 rural establishments, 96% with areas under 100 ha, and 75% under 10 ha. Four hundred thousand small establishments closed their activities in 1995 and 1996. Investments in land based activities or income generation programmes through, access to financial services, can help alleviate distress. Credit programmes, and indeed savings programmes, mediated by groups and communities of the poor could be critical as part of their survival strategies as well as giving sustenance to associations engaged in the struggle for poor peoples' rights. Savings and credit programmes provide such communities with an opportunity to break out of this condition and reinforce their self-esteem. As part of a rights agenda that ActionAid International is pursuing, it is questionable whether savings and credit as the entry point of a development intervention will necessarily lead to building political awareness amongst oppressed groups. Group formation in tends to be economic centred rather than oppression centred. Similarly, in the rights-based approach, microfinance should not be seen as an end in itself towards channelling credit. Instead, it has to be seen as means to help mobilise people, assist them in the process of asserting their rights, particularly livelihood rights, and sustain them during the course of the struggle for this assertion. The rights-based approach also recognises that ensuring justice and equity for the poor and marginalised is the primary responsibility of the state. Community-led sustainable microfinance programmes could help in setting up replicable modes or institutions that would catalyse the state into action. Indeed, NGO-promoted Self-help Groups are being seen by the formal banking sector as a viable proposition and substantial financial resources are being made available for such groups. Finally, it has to be recognised that there are sections of the poor population that microfinance cannot reach. Destitute, and even disabled persons may have only limited means and opportunities to gain the benefits of financial services. Strengthening their position in society requires more direct action. AA Nepal - targeting the poorest Micro finance is an important tool for the poorest of the poor who suffer at the hands of informal moneylenders and trade agents. AA Nepal's micro finance programme aims to protect incomes and change oppressive social relations between men and women. The poorest of the poor, especially women and marginal ethnic communities, are targeted. AA Nepal conducts a base line survey using participatory rural appraisal (PRA) tools, and the programme begins with the lower quartile of the identified poor. The programme is owned and controlled by community groups, which are also supported through education and training programmes. Since they have to manage the common resources available to the group, every member is vigilant over utilisation and repayment of loans. Groups have been gradually liberating themselves from moneylenders, undertaking livelihood enterprises and bringing down the interest rate of the informal market in the area. In some areas, savings and credit groups have displayed a new confidence in influencing party politics by choosing their ward representative from their own group. Gender and caste relations have also improved due to the facilitation of field workers. Microfinance in Vietnam Women's participation in microfinance has created opportunities for them to negotiate and discuss with their husbands in managing the borrowing of capital for the household's income generation activities. It contributes to change in the roles and status of women in the family. An example of this is Ms Kieu Thi Tim of An Hai Commune who was a homeless single parent ranked one of the poorest in the village. With a small first loan she built a home, which she repaid in a year. With a second loan she started a breakfast joint and began duck rearing. Key learning In attempting to draw together the implications of the review findings, ActionAid teams involved in the study clearly see support for the development of sustainable community-owned and managed financial institutions as the way forward. Promoting such institutions is seen as an alternative to the present pre-occupation with "minimalist" microfinance, through specialist microfinance organisations - the targeting and efficacy of which is increasingly being questioned. ActionAid's review of its microfinance work has been challenging, honest and thorough. It arose from a perception within ActionAid that we are not among the best micro-finance practitioners, particularly in terms of financial practice and reaching the poorest of the poor. Microfinance is a specialised service, requiring skills, monitoring systems and human resources ActionAid is not able to develop and maintain internally. These weaknesses are common to large agencies working in micro-finance. However, the positive findings and personal stories coming out of the review demonstrate the major improvements, which, ActionAid's savings and credit work has made and can make in many people's lives, and the innovative methods, which have been used to deliver financial services to the poor. Ruchi Tripathi Food Trade Policy Analyst ActionAid Hamlyn House MacDonald Road London N19 5PG Ph: 44 207 561 7560 ActionAid's vision is a world without poverty in which every person can exercise their right to a life of dignity. Registered Charity No. 274467 www.actionaid.org **DISCLAIMER** This e-mail and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this e-mail in error please notify the postmaster at <address removed>
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