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Microcredit Summit in Jordan : Empowerment of the poor

Jordan’s version of “Bank of the Poor” is expected to start working soon before the end of this year. This was highlighted at the Microcredit Summit in the Middle East and Africa, held in Amman earlier this week. Efforts are underway to make this ‘bank’ a reality in Jordan, as the government works closely with the private sector and the concerned NGOs, including the Arab Gulf Fund for the United Nations Development Program (AGFUND), to outline the bank’s financial strategy.

The main concept of the bank is to promote the principle of “microcredit” among the poor in Jordan, to help alleviate poverty by extending small loans to people to set up their self-employment projects. Microcredit loans target people who are too poor to qualify for traditional bank loans. The idea behind the bank of the poor in Jordan has been emphasized through the coordination between Her Majesty Queen Rania and Saudi Prince Talal Bin Abdul Aziz, president of AGFUND. It was initiated following the remarkable success achieved by Grameen Bank in Bangladesh, which was launched in 1983.

Grameen proved an effective and popular tool in the ongoing struggle against poverty, by enabling the poor to borrow at bank rates, and start small businesses. Since its inception, it disbursed more than $4 billion and had already retrieved 95 percent of the credits. It is not clear whether the forthcoming bank would be similar to the Grameen Bank; Queen Rania clarified, “Microcredit loans are not just small sums of money aimed at sustaining small projects, but rather a clear physical support for great ideas and a way to conquer barriers that curb man’s soul and inspiration.” She noted that microcredit loans “can either act as a tool to preserve human dignity or a way to push it further to aggravation”. It all depends, said the Queen, on the opportunity that the underprivileged would have to take the initiative to improve their lives through work.

It would help them to improve their standards of living and achieve self-sufficiency,” Queen Rania stressed. There is a growing community of institutions and NGOs in the Arab world committed to eradicate poverty by providing financial services to the poor and low-income people. In Jordan, these institutions do a good job where today there are about 20,000 active loans with an outstanding value of more than $9 million. The UN General Assembly designated 2005 as the International Year of Microcredit and has invited governments, the UN organizations, NGOs and other civil societies, the private sector and the media to join in highlighting and building the capacity of the microcredit sector. Jordan’s efforts to establish the bank of the poor comes as part of the international pledge to meet the Millennium Development Goals (MDGs) and the commitment to cut poverty in half by 2015 worldwide. Yet, only 10 percent of the world’s estimated one billion economically active poor have access to basic financial services, according to the UN’s Secretary-General, Kofi Annan. Saudi Prince Talal stated that Jordan is the first Arab country to introduce a bank for the poor.

Microcredit has become widely recognized as a powerful development tool to alleviate poverty, raise the standards of living, create jobs and contribute to economic growth,” he said. “Successful microcredit policies are those based on investment in human resources and institutions more than relying on providing grants to borrowers.” Professor Mohammad Yunus, managing director of the Grameen Bank, strongly believes that Jordan has the potential to have a successful bank for the poor “once the Jordanian government applies transparent policies that provide autonomy for the bank, and upgrades its monetary policies to serve the bank’s objectives,” he told The Star. Yunus also pointed to the required political reforms that would encourage the poor to obtain microcredit loans. He noted that the government’s basic role is “to form policies that preserve microcredit institutions’ autonomy free from governmental involvement”.

According to experts, the already existing local microcredit institutions in Jordan should set up the basis for the forthcoming bank of the poor. Nasser Kahtani, executive director of AGFUND, itemized the essential steps for a successful bank of the poor. “First, form a national taskforce to prepare a work plan and a conceptual framework for the procedures needed to establish the bank,” he said. The taskforce would have the authority to supervise, follow-up and formulate the required implementation. Kahtani said the bank’s development process requires “sufficient funds from the government, the private sector and individuals to ensure those funds would meet the bank’s objectives”.

Local microcredit institutions are also responsible to apply sound business practices, maintain operational sustainability, adhere to good governance and transparent reporting, he noted. The microcredit summit outlined four main challenges: Reaching the poorest, empowering poor women, building self-sufficient microcredit institutions, and ensuring a positive measurable impact on the lives of clients and their families. Women were seen as prospective persons to alleviate poverty in their communities and enhance social and economic development. About 95 percent of Grameen Bank’s borrowers are women, and the same could be said for Jordan, where women are leading in that regard. Experts emphasized that women are more inclined to microcredit loans than men.

For many of the poor women, access to financial services brings new economic options, self-confidence and empowerment,” said Lennart Bage, president of the UN International Fund for Agricultural Development (IFAD). He pointed that by empowering women through microfinance, they would soon be economically influential members of their communities, and provide greater chances for their children to go to schools, to obtain health insurance, and for their households to make choices that best serve their needs. Buthaina Jardaneh, executive member of the General Union for Philanthropy Association, told The Star, “Jordanian women are ready to take the initiative in their hands once there is a healthy environment available for them.

She explained that Jordanian women wait for the government to enhance the political and economic reforms in terms of providing more access for women to participate in decision-making processes. “We need also to have reforms family wise, by changing public attitudes that are still reluctant to entrust women,” she stressed. Experts and women activists maintained that awareness and education about microcredit loans are key factors for the concerned institutions to succeed. They tackled the challenge of integrating microcredit loans with non-financial services, such as health education and training, provided for poor women.

The credit and education components reinforce each other by addressing the informational and the economic obstacles to health and nutrition,” said Christopher Dunford, president of the US-based Freedom from Hunger. “The key element is delivering both services by one field staff [of the microcredit institution]. This requires an efficient management to make an extra commitment to staff recruitment, training and supervision.

Amman,25October2004
Ghassan Joha
The Star


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