Micro-finance is in the news again. With the support mostly from donor agencies, the Centre for Micro Finance (CMF), a Nepali micro finance think tank, is organising a Micro Finance Summit, 2008, with the motto of reaching the poorest of the poor for sustainable income. As it is to end with a “joint declaration” as “feedback to policymakers”, it very much seems to be headed for the same fate as that of the UN-declared “Year of the Micro Credit” in 2005. It was “celebrated” with all the panoply of a big event but wasn’t able to serve its primary purpose.

Many of the same faces including the UNDP figure in the upcoming event, but there is no reference to incremental relevance of the Micro Credit Year to the summit that begins today. Although the donor and NGO officials are identified as “stakeholders”, one wonders how the poor people in the village — the genuine stakeholders — would react if only they had the full information as to how money is being spent in their name. Almost all development agencies use micro finance as their entry point leading to a wide proliferation of saving and credit groups in the villages with the poor joining several overlapping groups at the same time. In order to keep the poor villagers glued to “their groups”, the donors and their NGO surrogates garnish their offer with “special benefits”. Lately, the Poverty Alleviation Fund (PAF) with about $100 million World Bank grant has joined the fray with its own approach with the potential to devastate the entire micro finance world of Nepal with undue emphasis on fund disbursement rather than on capacity building. In the 80s, the large IFAD lending to the Small Farmer Development Project (SFDP) of the Agriculture Development Bank had had just that consequence.

One problem with the micro finance initiatives in general is that they do not have even the basic information as to the overall population of potential participants and those already participating. The National Planning Commission, while trumpeting to alleviate poverty, has done nothing to generate and analyse essential information. Most agencies implement their programmes only in a limited number of places close to the district capitals to ensure accessibility of transport. As a result, even after two decades of micro finance initiatives taken in Nepal, no district has been able to take advantage in a significant way. While the approaches are highly diverse, the target beneficiaries themselves hardly have to role-play. Nepal’s micro finance remains centrally conceived and supply-driven and reluctant to learn from successful experiences.

Although poverty alleviation remains the professed goal of all micro credit initiatives, the poor have hardly been able to benefit from them. The village saving and credit groups have generally very small pots of money - their own little savings and an “equal sum” or so, “generously” donated by the donor - and are unable to extend sizeable loans necessary to make a dent on the members’ income poverty. In one such group in Sarlahi in 2004, even as they argued for small loans for their income generating activities, 23 of its 24 members owed large outstanding debts to the moneylenders.

While 78 per cent of the workforce in Nepal’s 26 million people are engaged in agriculture, land availability continues to dwindle, 0.15 ha per capita (1998) and underemployment continues to soar (47%). But due to illiteracy and lack of skill, they can neither be absorbed by the non-agricultural sector. Migration has traditionally been the source of much needed supplementary income and there is no alternative to making the village economies grow. This is where micro finance can significantly contribute by promoting inclusive, equitable, sustainable, participatory and accelerated growth. Group effort is of the essence in micro finance. It is through group initiatives that the passive poor steadily transform themselves into active stakeholders and entrepreneurs due to their cash savings and income generating endeavours. The NGO social mobilisers play a crucial role in this respect by constantly coaching them on new possibilities.

However, it would be only over a period of several years that the poor would graduate out of poverty. Therefore, sustainability of such group effort is crucial and can be ensured only by the stakeholders themselves managing their affairs and thriving without donor grants or subsidies. Besides, with increasing success they would need more capital to invest, which can be sourced by accessing regular financial institutions. Given such serious challenges facing Nepal’s micro finance initiatives so far, ending the summit with a mere “Declaration” would be tantamount to shedding crocodile’s tears at the plight of the poor. At the very least, the summit must come out with an agenda of action, an institutional mechanism to implement them and a government-donors consortium to support them.

Shrestha is a development anthropologist