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Where microcredit is working

UNICEF is not new to microcredit, having supported the Grameen Bank's efforts in Bangladesh since the early 1980s. A number of country offices have also made credit an integral component of programmes designed to increase access to, and sustainability of, basic social services.

UNICEF-supported programmes are successful not only as measured by loan recovery rates but also because they have broadened access to basic social services and empowered women in a number of countries, including Bangladesh, Benin, Brazil, Cambodia, Egypt, Guatemala, India, Kenya, Nepal and Viet Nam.

In Bangladesh, the Grameen Bank, with UNICEF assistance, integrated social development activities into its credit extension services, adopting the now familiar 'Sixteen Decisions' that are recited in every weekly meeting of the Bank's borrowers. The decisions affirm, among other things, the need for health services, adequate nutrition, child spacing, safe water and sanitation and primary education, as well as the elimination of dowry in marriage.

In Nepal, UNICEF has linked the delivery of social services to credit and other support provided under the Small Farmer Development Programme (SFDP) since 1982-1983. Implemented by the Government, the programme reached 123,000 families in 422 villages and 75 districts by 1992. In areas where credit has been combined with support for basic social services, infant mortality is lower, school attendance for girls is higher and children's health, nutrition and education have shown greater improvement, than in areas where credit alone is given or where no credit is provided. In 1982, UNICEF began supporting the Production Credit for Rural Women (PCRW) programme by providing credit and training and supporting community development in five districts. In 1988, the programme was extended to 37 districts for which the International Fund for Agricultural Development (IFAD) supplied funds for credit. Since 1989, credit has been linked with social development messages, drawing on the experiences of the Grameen Bank and the Self Employed Women's Association in India. The approach of combining credit and basic social services has been successful, attracting support from a number of donor and multilateral agencies.

In Viet Nam, UNICEF provides loan funds for programmes administered by national non-governmental organizations (NGOs). These programmes combine credit with access to basic social services and information, using tools such as the basic health manual, Facts for Life, and opportunities such as the national literacy campaign. The results are positive: In one programme, 97 per cent of daughters of borrowers attend school compared with 73 per cent of daughters of non-borrowers. Dramatic improvements in household food security were also observed, with only 12 per cent of borrowers reporting food shortages of three months or more compared with 73 per cent of non-borrower households. Communities identified having water closer to the home as a major need that they would like to see fulfilled through access to credit.

In Cambodia, since 1988 UNICEF has provided core funds for microcredit through NGOs. Microcredit helps build the borrower's confidence: By completing successful rounds of credit with the NGO, the borrower is in a better position to apply for credit with commercial lenders or state-owned banks. The programme is now managed by commercial banks and government departments. UNICEF no longer provides funds for credit, directing support instead at capacity-building at the district level. Since the programme's inception, over 15,000 women have received credit. The recovery rate of 70 per cent is relatively low because it has been affected by severe fluctuations in borrowers' incomes because of droughts, flood and war. Based on national experience and exchange visits to the Grameen Bank, a savings component and a fund for insurance against natural disasters have been instituted.

In Egypt, the UNICEF-supported Family Development Fund Project was set up in 1993 in cooperation with the Government. The programme, growing rapidly, now has 3,600 borrowers and is being implemented through local NGOs in four poor rural regions. Loans are used for small-scale enterprises in cattle raising, retail trades, food processing, sewing and handicrafts. Another 2,700 borrowers are reached through a programme that was initiated with UNICEF assistance, but that is now managed and run by a commercial bank. In another scheme, microcredit is helping to combat child labour in an urban slum area by making credit available to poor women whose children work, as long as the children also attend school. The recovery rates in the various schemes are all over 95 per cent. A commercial bank has recently committed credit of almost $6 million for the poor to be lent through group-based schemes along the lines of the Grameen Bank model, with UNICEF providing technical support.

In India, UNICEF has supported the Development of Women and Children in Rural Areas (DWCRA) programme run by the Government, which in some regions advances loans to women. In Nellore and Anantapur Districts in the state of Andhra Pradesh, for example, women pool their savings as a group: the money is then used as a revolving fund from which members of the group can borrow, at above market rates of interest but still below moneylender rates. Once the borrowers have shown that they can manage the payments, additional resources for loans are provided by the Government and donors. In some villages, these funds have been rotated 22 times since 1988.

The credit is linked to access to basic social services and social development messages and as a result, the children of borrowers are healthier -- almost 100 per cent of children are immunized. Families have improved their nutritional status, through the cultivation of kitchen gardens, and they follow clean sanitary practices. Women have been empowered through the programme, openly discussing domestic violence, alcoholism and village conflicts. They are treated with greater respect by men and are more aware of their health needs, seeking medical attention for ailments that would have been endured silently in the past. It is recognized that while the empowerment of women is a process that will not happen automatically, credit is an important component for accelerating that process.

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