INTERNATIONAL WORKSHOP
"BEYOND GLOBALIZATION TO LOCAL REGENERATION"
MALTA, 29/30th of APRIL, 2000
BUILDING PARTENERSHIP
FOR A SUSTAINABLE FUTURE IN THE MEDITERRANEAN
WHAT ABOUT MICROFINANCE?
Dr. Elisabetta Bottaro
ETIMOS (Pd)/Italy
In these 50 years of history the International Cooperation for Development (1949: Truman’s speech on the extension of the Marshall plan to the Amicable Countries) has lived through various seasons, each one in tune with the political climate of the moment.
From the public aid of the 60’s we have progressed to the solidarity of the 70’s and to the interdependence of the 80’s. But beyond the slogans, the use of cooperation as a political instrument prevailed.
It was in the 90’s and in more recently in the year 2000, with the focus on global human security that people were placed for the first time in the center of attention of political cooperation. An important factor in this change of direction in recent years has been the end of the divide between the two West- East blocks which the planet was divided into until a decade ago and which had an effect on any political interest.
In this altered international scene, the Cooperation for Development, understood as an instrument of foreign politics, as a marketing instrument to work as an incentive for export or even as an instrument for security purposes but security for territories and not for people, has been strongly contested.
The cooperation needs a strong re-launching in order to renew both means and objectives. In the current debate with regards to the review of objectives and methods of the International Cooperation for Development, some data have become indispensable pretexts:
Complexity must be taken for granted as a category of political and scientific analysis, and as an instrument of action in favour of development and in the fight against poverty.
All this permits the adoption of a developmental strategy, for future years, with the intention of merging together various objectives as are the acceleration of economic growth, the reduction of absolute poverty and the prevention of ulterior environmental degradation whilst focusing on the issue of the expansion of human choices as the fundamental scope for human development.
The true wealth of a country is in fact its people and with regards to this the fundamental objective of the development must be to create an environment that allows people to enjoy a long, healthy and creative life, and that thus goes beyond the sole expansion of revenue and wealth.
A new factor for which development must be used is moreover the concept of sustainability so that the present generations, thanks to the economic, fiscal, commercial, energetic, agricultural and industrial political adopted, the present generation are actors in a development that does not leave future generations an inheritance of financial, environmental and social debit.
Recently, instead of the traditional politics of support and assistance the PVS, based implicitly on an essentially passive role, actions aimed at guaranteeing the direct involvement of the PVS have been preferred, and which take on the true status of real partners with equal responsibility and dignity with regards to the countries from which the aid comes.
New politics of partnership, therefore, with regards to strategies and objectives of endogenous development.
The Cooperation for Development is no longer something external to the politics adopted by the beneficiary country but an integral part and acts in collaboration with the local institutions.
Two events in the last years have produced important modifications in the politics of cooperation of the European Union: the Review of the Convention of Lomè IV and the Conference of Barcelona.
We are witnessing a phenomenon in action on a world-wide scale which is globalization but that is essentially the globalization of large economic interests.
This ideology does not recognize the difference of others from the western model, and for this, countries that do not succeed in producing a picture of modernity, or that do not accept subordination to the new order, become marginalised.
So that those excluded do not become social "desaparecidos", they must create their own existence.
The creation of an alternative economy as strategy for survival is where it can be demonstrated another market and another type of finance is possible where men and women, the elderly and the young, excluded from an unjust economic system, can construct a life worth living.
It is in this context that the concept of Ethical Finance may be placed, a concept that has inspired all the new experiences regarding finance in the last 10-15 years within the area of developmental aid in countries in the South of the world.
Ethical Finance is that form of finance that believes in the person and that invests on attempting to increase as much as possible opportunities for the active participation of all persons so that there is common access to fundamental goods, services and human relations without which one cannot speak of the dignity of a human being.
In the presence of an ever increasing disinterest on the part of Governments to load themselves with the reduction of the difference between North and South and therefore with the bags of poverty, it is vital that civil society finds the courage not only becoming involved in first person with regards to the existing domestic social problems but also with international ones.
The problem of the fight against poverty is fundamentally a problem of access to opportunities for one’s self-realization as a persons on the basis of free and responsible choices.
In the PVS access to productive opportunities signifies access to ground to cultivate, access to water for irrigation, access to the technologies through the formation of human capital, access to the education, basic sanitary assistance for all, and, last but not least, access to credit for small businesses.
In many areas of the South, an active and vital system of productive micro-realities of an informal nature already exists, which guarantees the survival of the greater part of the population.
This entrepreneurial small scale cloth, woven in typical local contexts and based on collective values and common rules, often represents something similar to productive districts and can become a factor of economic prosperity for the entire area under consideration.
The contribution of the more industrialized countries can be in the promotion of those environmental conditions inside poor countries that can favor the increase and the strengthening of the existing productive situations, leading to their transformation into small-scale entrepreneurial models, more efficient and more advanced.
Nowadays the task of the International Cooperation is to disseminate in the PVS a culture of entrepreneurship and an approach to development that starts at the roots, privileging above all productive micro-realities and promoting initiatives that can favor a more active participation in the economy of the area and an tighter connection with the Pmi of industrialized countries.
There is the fundamental conviction, amply demonstrated by the data collected from those operating in the field, that small enterprises carry out an important role is in the PVS where, with the production of handicraft objects, agriculture and breeding of cattle, employ nearly 50% of the workers, as well as in industrialized Countries mainly functioning above the tertiary level.
Small enterprises act as integrators of large industrial enterprises that alone have not succeeded in providing wealth to many zones of the world, this thanks to the former’s greater mobility and flexibility. Small enterprises need little capital, little space for offices, little time in order to begin the decision-making processes, can also prosper in rural areas, slowing down therefore the race to urbanization.
For all these reasons, nowadays remarkable credit has been given to this new micro-entrepreneurship as a means for the reduction of poverty and for the development of our planet.
In fact, it is thanks to those politics that render persons, including the poor and marginalised, able to participate in growth and, therefore, those politics that invest in the human capital that make it possible to stimulate an increase in economic growth, thus reducing inequality and poverty which always arouse great concern.
It was the World Bank in its report of 1990 to recognize that, while " enormous economic progresses "was being reported, a part of the humanity - more or less fifth - was not simply " a lot behind ", but was just "excluded " from the new global society.
Undp, the Program of the United Nations for Development, a year after the above mentioned organisation progressed with its " Report on human development ", thus driving the knife deeper into the wound: while a part of the humanity improves its conditions and the " super rich " increase in numbers, another part’s position worsens both in an absolute and in a relative sense.
According to the Human Development Report 1999, the "global " citizens are 65% of North Americans, 55% of Europeans, 13% of persons living in other industrial countries, 3% of the population of the European East, 30% of Asians, 16% of Arabs, 17% of Latin American and 1% of Africans. This rich one fifth of the world’s population has a revenue equal to 74 times that of the poorest one fifth. The relationship was 60 to 1 in 1990, and 30 to 1 in 1960. And the rich become richer fast: at the rate of 500 dollars per second between 1994 and 1998, in the case of the 200 richest their wealth equaled the revenue of 41% of the poor of the world’s population.
In order to reduce poverty in the world, in the course of numerous global conferences held in the 90’s, numerous agreements on the following have been adopted:
and finally with the Summit on Microcredito held in Washington, in February 1997:
An objective that the Summit set itself to achieve within the year 2005 is to reach with credit, in order to be able to promote occupation and other important financial services, at least 100 million of the poorest families.
The novelty of this Summit is that it recognized micro-credit as a new instrument of international cooperation, an instrument useful in passing from logic of the gift to that of the loan, from the logic of the all-inclusive project, to the logic of supplying instruments so that the participants may become actors of their own development. Today it is officially recognized therefore as an instrument useful in creating a positive and innovative change in the international cooperation for development and one of the instruments most effective in the fight against poverty as an aid to socio-economic development in countries South of the World.
The logic of the gift is currently being put into question since often this does not only contribute to the development, but can even oppose it. In fact, it is held that it has an effect on the beneficiaries in that their receiving help in this way reduces the motivation to entrepreneurship.
The promotion of credit in the South becomes, in this context, an urgent necessity in order to give the opportunity to the majority of poor persons of inserting themselves in the real economy.
Micro-credit is an instrument that is based on a simple but effective idea: the giving of small loans to the poor in the South of the world, mainly to women or persons to which nobody it has ever given credit, and to reach an agreement with them on the conditions of reimbursement because the poor tend to be much more reliable if they are rendered responsible, and the facts demonstrate this.
Micro-credit is therefore a fundamental instrument for the growth and the development of all those people who traditional finance considers not bankable because they lack guarantees obtained from assets considered to be of value by the banks.
In the PVS the beneficiaries of micro-credits generally are:
The experience of acquired micro-credit from the consolidation of the pioneering initiatives devised and experimented 10-15 years ago by persons and organizations sincerely dedicated to the cause of peace and solidarity, passing from international financial institutions, to ethical banks, the international organizations of micro-credit, today allow us to assert with sufficient certainty that a finance mindful of the value of ethics and of the rules of the market can give an enormous contribution to the process of development of the poor of the PVS.
This is practicable and there is space for a healthy financial market activity in the realization of programs of international aid to development aimed at overcoming the conditions of poverty of the majority of the persons in impoverished countries. This is demonstrated by poor persons who after receiving such trust gives as much and become therefore participants in their future.
The methodologies most utilised for the distribution of micro-credit services are:
To date, the programs of micro-credit that have been put into place have demonstrated that it is possible to efficiently serve wide bands of disadvantaged members of the population, through the distribution of loans many of which small, on condition of adjusting the methodology to the local reality, the characteristics of the customers and their requirements.
Micro-credit is not only a financial product which is supplementary to the classical bank financial services: it is a radically new way to conceive the role of the credit in the development processes. If the offer of financial services is calibrated on the characteristics and conditions of a narrow economic and a political one, not only does the credit not assume a useful role in the economy but is destined to generate a vicious circle of credit-saving that curbs the effectiveness and restrains the ideas, the projects and the human resources of an entire society.
In an age in which finance has become the true government of the economy, capital goes where there is already wealth.
The poor - the billions of people excluded from the development in the South of the world, and also the aged and new poor on the margins of the opulent societies of the West - are invisible in the official financial market. According to an expression of Muhammad Yunus, the founder of the " bank of poor " of the Bangladesh, the concession of loans that the banks practice is a real social apartheid.
Often, the only source of credit for craftsmen and peasants is that of the ‘coyotes’, as termed in Latin America, that is, the local commercial intermediaries. Or more simply the ‘usurers’. Those who don’t pay are in actual fact enslaved with these debts with all the family including the children. This is the sad story of the African economies of the post-colonialism era; this is what has happened a everywhere, to some extent, in Asia as in Latin America.
Nonetheless if we look at some data processed from the UNDP it seems that while the richer 20% of the world population generate 80,6% of the world savings and obtain 94,6% of the credit distributed in the world, over a billion persons, that constitutes the poorest 20%, hardly count for 0,2% in the world market of credit, but produce 1% of the global savings.
These two types of data are both clamorous: first of all the concentration of credit is much more than that of the yield; but more important is that poor persons tend to save.
Fortunately it is important to say that in the history of the last two decades, through a slow and submerged process of popular self-organization in populations, and the reappearance and valorization of traditional financial practices (from the African Africans to the Andean pasanaku), the poor have begun to organise themselves. As took place in Europe and Canada between the end of the 800’s to the beginning of ' the 900’s, where mutual experiences were the origin of an authentic financial solidarity in Asia, Africa and Latin America where there is the emergence of orginal experiences of the collection of city and rural saving and the distribution of credit of a reduced dimension to producers and micro-entrepreneurs who had never crossed the threshold of a financial institution.
It is the case of the Grameen Bank in Bangladesh or the Bancosol in Bolivia.
It is the case of the hundreds of cooperatives of saving and credit, community banks, village banks, that do not get into the news and do not end up being discussed in international debates on development and cooperation. Millions of persons in the periphery of the world try to survive in the economy of exclusion through small productive and commercial activities, in city and rural areas, outside the norms of the official economy. It is largely true that the vast informal economy, especially in the cities of the Southern Hemisphere, employ up to 60% of the total workforce. Sure, in the informal economy we find all sorts, from the drug market to children working in stone quarries.
But we also find many initiatives of small production, small commerce and even small credit that evidence of hidden resources. They represent attempts of social and economic return and also introduce elements of solidarity and mutuality. The art of making do? Also. but from another point of view, they can also be seen as micro-enterprises, small projects of independent work often vital economically, but cut off from the " financial barrier ".
According to the Unctad, the agency of the UN for commerce trade and development, today in the world there are approximately 500 million micro-enterprises of this type. Only 2% of them have access to credit.
The formal banking system considers them " not bankable ", without patrimonial guarantees, with too small to allow the bank to earn enough. In other words: they are not rich.
In the same popular economy, however, certain forms of saving and credit have been developed in part to attenuate the " financial barrier " of the micro-enterprises. The most widespread form in Africa, for example, is that of the tontines.
The tontine is a private grouping of savers who, at agreed deadlines, deposit a prefixed sum, generally small. Everyone of them is entitled to the capital constituted from the deposits of all the participants. Due to their size, the tontines finance essentially the emergency situations and the small investments. But it is already something. Some of these " institutions " of informal credit are based on solidarity, others are more commercial. Fundamentally it is re-elaborating these shapes of self-organization that the finance of the poor is created.
Micro-credit is one of the more interesting frontiers ethical finance. What follows is a concrete example concrete.
The cashew is, after cotton, the second most exported agricultural product of Benin, one of the poorest African countries (380 dollars of revenue per capita). But, like for cotton, the cultivators have little or no say on the price of cajou – the original Brazilian name of the cashew nut. The State fixes the minimum price - currently 175 franchi cfa (525 italian Liri) to the kilo - and for the rest the cultivators is at the mercy of the traders who are in a better position to take advantage of this position.
Therefore last year the Gea, Groupment DES exploitants agricoles du Benin, a federation of 12 thousand cultivators and breeders, of which more than half are women, have started an experience of " collective commercialization " of cashews.
The Association of the producers of cashews affiliated to the Gea (2.500 cultivators approximately) has succeeded to obtain with at least one large trader a price of 325 franchi cfa to the kilo.
Thus united, it has been possible to obtain from a state agency, the Papme (Agency for the promotion of the small and medium enterprises), what alone the farmers had never obtained: a " season credit " that has prevented the selling of the product in advance at totally reduced prices.
This is one of the many examples that helps us understand concretely how the access to credit permits the reaching of those levels of production that provide an escape to the trap of shortage, and therefore it is a formidable attack against emarginated and poverty, in favour of development and dignity. This model of social cohesion and solidarity, which is in a position in determining a more favorable environment for the creation of processes of economic development, is applicable both to the South as well as the North of the world.
In the case of the Mediterranean basin, in anticipation of the setting-up of the zone of Free Euro-Mediterranean Exchange which all the participants at the Conference of Barcelona of 1995 (15 community countries and 12 non-community Mediterranean countries) have committed themselves to achieve within the 2010, micro-finance and micro-credit can play a fundamental role in the management, conservation and re-evaluation both of human resources as well as of the environmental resources for the sustainable development of this sick giant.
Economic inequalities, social tensions, pollution, have in fact reached such levels in this area that one cannot remain indifferent any longer in when faced with these.
The agreement with the countries of the Maghreb and the Middle East for the creation of a Zone of Free Exchange in the Mediterranean cannot but contribute to the destruction of the already fragile Mediterranean economies of countries like Morocco, Tunisia and Egypt. The superiority of the European manufactured product is obvious and on these the free exchange is carried out.
The compared advantages of Southern countries evidently lies in the agriculture and services. But these are excluded from the zone of free trade.
Another quantitative index to consider is that of urbanization, which is often taken to be a positive factor of the modernization of these countries. Perhaps the immense growth of some cities of the Mediterranean is not caused, like it has been in some cases of the past, by a positive phenomenon, that is of political or economic expansion of the city, but it is often a sign of the forfeit of the surrounding zones, of the decay of the mountain communities and of the semi-arid zones.
To all this is added the leveling of the current economy : that of globalization.
The globalization, that is transnational economy, is definately present in the Mediterranean which is considered to be a base for the refueling of raw materials and human resources at a good price. The negative effects of globalization are, for example, social conflicts, emigrations, ecological disasters resulting from oil industries, the phenomena of organized crime on an international level as is the drug business etc.
What can be done in this context is to use the correct mechanisms in order to protect and to favor the increase of regional integration, aiming at elements such as:
Since an area of free exchange that remains such for many years does not exist, an evolution in economic and social systems will have to take place that it transforms the area of free exchange into a domestic market, with shared rules of exchanges and commerce. Otherwise the area of free exchange will regress, becoming unstable and favoring the accumulation of problems related to environmental exploitation and emigration from rural zones to urban ones, from the South to the North.
Favoring the development of a peace zone, stability and prosperity in the Mediterranean basin signifies, therefore, the creation of new economic and social mechanisms.
Micro-credit is one of these mechanisms.
The advantage of micro-credit it is that it leaves the individual recipient of financing to decide what to do with this money and, therefore, in respecting the culture and the environment it favors a development that places the person at the center of every process, responsible and participant of his or her own future.
It is an instrument characterized by a strong flexibility that responds from time to time to the social requirements that appear, defining the values, the traditions and the cultures of all , and respecting, where present, the central position of the social organization and the structures of material life.
Walking this road, we will be able, therefore, to achieve in the Mediterranean a social and economic development which is sustainable and balanced, aimed at the attainment of a basic objective: to create a zone of shared prosperity putting by valuing the human and material resources.