EU Presidency Statement - Launch of the International Year of Microcredit 2005

Mr. Chairman,

It is an honour for me to speak here today at the Launch of the International Year of Microcredit on behalf of the European Union. The Candidate Countries Bulgaria, Romania, Turkey and Croatia*, the Countries of the Stabilization and Association Process and potential candidates Albania, Bosnia and Herzegovina, the Former Yugoslav Republic of Macedonia, Serbia and Montenegro, and the EFTA countries Iceland and Norway, members of the European Economic Area, align themselves with this statement.

First of all, I would like to thank Her Royal Highness Princess Mathilde of Belgium, and Excellencies Mr. Chowdhury, Mr. Ocampo and Mr. Malloch Brown, for their introductory remarks here today. Your active personal commitment shows the enormous importance of the topic before us. Furthermore we would like to congratulate Ms. Titiek Winarti as winner of the Global Microentrepreneurship Award.

I would also like to congratulate and commend the organisers of this event, especially the UN Capital Development Fund (UNCDF) and the Department for Economic and Social Affairs (DESA), with their achievements so far: institutional arrangement have been made, and an eight-member Coordinating Committee has been established. The list of Patrons is impressive. National Committees are active in 45 countries. The EU is impressed most particularly that you have been able to bring together a group of distinguished high-level representatives from the private sector, the press, non-governmental organisations, foundations and the academic world to act as Advisors to the Year of the Microcredit. The Advisors' Group will advocate the goals and objectives of the Year and represents a wide range of people with strong commitment to the ideals and principles of microcredit and microfinance. My delegation would like to use this occasion to also acknowledge the presence and personal involvement of Her Royal Highness Princess Máxima of The Netherlands as an Advisor to the Year of the Microcredit.

Mr. Chairman,

The EU warmly welcomes the International Year of Microcredit as an occasion to highlight the importance of building inclusive financial sectors, accessible to poor women and men. Four years ago, we adopted the Millennium Declaration, in which we set ourselves challenging targets, such as reducing by half the proportion of people living on less than one dollar a day, and to reduce by half the proportion of people who suffer from hunger. We believe that microcredit and microfinance play an important role in achieving the Millennium Development Goals, in particular the goal of poverty reduction.

Poor people need a variety of financial services, not just loans. Like everyone else, the poor need a range of financial services that are convenient, flexible and affordable. Under the right conditions, including an enabling policy and institutional environment for private sector development and for informal sector development, access to financial services and microcredit enables poor people to increase their incomes, build assets and reduce their vulnerability to crises. Clients of microcredit and microfinance, in particular women, are empowered to translate their increased incomes into investments in improved livelihoods, such as education, health, nutrition, and better management of household emergencies. In addition, access to financial services such as loans, savings and insurance can provide poor people with a vital cushion in times of economic shock and natural disasters, unemployment or personal crises, such as sickness or the death of a family member. The fact that women become active participants in economic activities through microcredit and microfinance, and attain new roles as cash income earners and managers of household incomes, is vital. It strengthens their confidence and equips them better to overcome social, economic and


* Croatia continues to be part of the Stabilisation and Association Process

cultural inequalities. We must however continue to do our utmost best to ensure that women, in all countries, have equal opportunities to profit from microcredit and microfinance services. Rural development is a focal area in the European Commission's development co-operation, not least with the ACP countries. This has given us encouraging experiences of the importance of microcredits for gender equality, employment, social development and economic growth for the benefit of the poorest people.

There is still a large unmet demand for microcredit and microfinance. Our major challenge is to reach the poorest. The recent publication by UNCDF entitled 'How can USD 100 change an economy?' provides us with five inspiring stories about loans that changed the lives of entire families. With the help of microcredits, these families now run dignifying successful businesses in Cambodia, the Philippines, Bolivia, Uganda and Mozambique. Allow me, Mr. Chairman, to describe one of these inspiring stories.

In La Paz, Bolivia, a woman used to sell flowers on the streets. Fifteen years ago, she was granted, together with three other women, a loan that allowed her to buy flowers in bulk at a much cheaper rate. Today she has a business of her own and she uses her savings to pay for her children's education. A chance she herself never had. This is just one example.

The advantages of microcredit and microfinance go however far beyond the eradication of extreme poverty and hunger. The story of the Bolivian woman clearly shows that, due to the positive spill over effect of her flower business, her children can now finish primary education. In other families these profits are being used to improve, for example, housing conditions. Because of these positive externalities, we believe that good access to microcredit and microfinance contributes to sustainable development in many countries. Microcredit and microfinance will however reach the maximum number of poor clients only when it is recognized as a national priority and integrated into the financial sector. Challenges include mobilising savings, providing long term capital and prudent regulation.

Mr. Chairman,

Let these inspiring stories guide us through the International Year of Microcredit. Our goal is far beyond extending more credit to more poor people. Our goal is to figure out how to work together in partnership to build financial sectors that work for everyone and in particular for those that are trying desperately to climb the economic ladder to get out of poverty.

I thank you.

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• EU Presidency Explanation of Position - Role of microcredit and microfinance in the eradication of poverty (6/12/2006)