Opening remarks from Mr.Omar Halim, Executive Director of NAM CSSTC

In the context of the world economy, the majority of developing countries are becoming more and more marginalized. Their performance with regard to economic, sustainable, rapid and equitable growth unfortunately have been less than adequate. NAM CSSTC’s objective is to assist those interested NAM member countries to significantly improve their performance to obtain a solid and equitable economic foundation to catch up with the developed countries. One of the focuses we have in our programme is Small and Medium Enterprises (SMEs). We are very interested to assist this particular group because SMEs are the back-bone of our economies in terms of unit of production and providing employment opportunities and thus become the main vehicle for many small and medium-income people to increase their earnings. Yet, in many developing countries  SMEs have been very much neglected. They have been taken for granted. The focus of attention of government policy in the past has been very much based on the idea of we should grow economically relying on the big enterprises and entrepreneurs, hoping for the so-called tickle-down effect to benefit the small and medium producers. But this approach is far from sufficient in promoting equitable development. The resultant increasing gap in the distribution of income and wealth creates social and political problems which weaken the national unity of the country. We feel that we should pay full attention on the SMEs, on the small producer, on the medium-sized producer, in order to contribute to their growth. We could do that by assisting them in a number of areas such as market information, upgrading of skills and technology, and capital. This last area is the focus of this workshop on micro financing.

Micro Financing is financing of small companies. They are small in magnitude but they are many in numbers. This is the challenge of many of these economies.  We will disseminate your ideas exposed in this workshop and also the recommendations you will make. We hope that the output of this workshop would be very fruitful for Non-Aligned Movement countries in formulating, implementing and monitoring these policies, programmes and projects on micro financing. Finally on behalf of the BOD of the NAM CSSTC, I  would like to thank the government of the Republic of Indonesia which has financed this particular workshop.



Session 1 : PANEL PRESENTATION ON “The Role of Micro Finance in Poverty Eradication”

Paper 1 : Poverty Reduction through Micro Finance Credit Schemes (Tanzanian Experience)

Speaker 1 : Cecilia Keenja, National Microfinance Bank, Tanzania

The main points of Ms. Keenja's presentation are as follows :

  1. Women and youth have been chosen as specific marginalized target groups for micro credit.

  2. Study shows that women area already the majority borrowers. 

  3. Lack of expertise in managing macro finance is still in existence.

  4. The commercial banks though growing in good number are reluctant to involve themselves in microfinance activities.

  5. The channeling of fund still faces some major constraints such as long bureaucratic procedure, limited management capacity to handle large projects and high costs to manage the projetcs.

The presenter recommended the followings :

  1. Government should not be directly involved in provision of microfinance services rather should give the fund to banks or other MFIs to reach the targeted groups.

  2. Government should account for funds in a timely, accurate and comprehensive manner.

Paper 2 : The Role of Microfinance in Economic Development and Poverty Eradication

Speaker 2 : Riza Primahendra, Bina Swadaya, Indonesia

The main points addressed by Mr .Primahendra are as follows :

  1. Imbalance of Economic Structure is the case of Indonesia in which vast majority of business entity are SMEs but their contribution to GDP, market share and growth are relatively small compare to big enterprises.

  2. The acknowledgement of microfinance issue is relatively limited for many political decision makers which hinders microfinance development.

  3. The main problem faced by SMEs and micro entrepreneurs is the lack of capital. The problem related to capital is mostly how to have access to the capital.

  4. There three approaches in microfinance practices, they are micro financing the poor, microfinance of the poor, and micro financing with the poor.

The presenter recommended the followings :

  1. Concerning the imbalance economic structure, the SMEs and cooperative must be empowered.

  2. It is a must to build the capacity of MFIs in order to make them financially self sufficient institution.

  3. There should be a paradigm shifting in looking the poor no longer as the have not and powerless individuals but as the have little and having potential to leaving poverty by their effort.

  4. There should be a regulatory framework for both microfinance activities and institutions.

  5. To develop microfinance there are some points need to be emphasized : a) the way the poor use their money, b) the existing microfinance approach that work in specific context, and c) macro economic policies.

  6. Collective and parallel actions are needed to ensure the development of microfinance.

Paper 3 : Poverty Alleviation and Micro Enterprise Sustainability (Some Evidence from Guatemala)

Speaker 3 : Edelberto Torres, OPCION, Guatemala

The main points of Mr. Torres's paper are :

  1. Research indicates that it is difficult for the majority of micro enterprises to produce enough revenues to sustain themselves, much less to expand.

  2. There is a tendency that commercial banks are reluctant to provide micro-credit.

  3. In smaller-scale loans, it is typical to convey the fund to micro-credit beneficiaries  through intermediary conduits such as NGOs.

  4. The support work of the NGOs during the first stage of new micro enterprise creation becomes indispensable.

  5. Formalization of micro credit system in which government plays important roles in practice brings more restrictions to the development of micro credit itself.

Mr. Torres's recommended the following items :

  1. It is necessary to amend the lack of coordination among various agencies involved in micro-credit programmes.

  2. It is necessary for the NGOs to have an adequate and clear definition of their group objectives and to have established technical criteria regarding sums, installment, rates and supervision.

Paper 4 : Micro Credit : Experience and Lesson from Nepal

Speaker 4 : Shankar Paudyal, IIDS, Nepal.

The main points addressed by Mr. Paudyal are as follows :

  1. Social mobilization is the core activity for any community development programme directed towards poverty alleviation.

  2. Women-based programmes are more effective even in planning and implementing community-based programmes.

  3. Grameen model of micro financing with its weekly-payment system is not really appropriate in a hilly region.

  4. Group approach is the fundamental principle of the micro-credit programme.

Mr. Paudyal suggested the following ideas :

  1. Socio-economic empowerment could be achieved with a follow-up package programme consisting of education, skill training, health, etc.

  2. Local level institutions should be developed for the sustainability of the programme,

  3. Encourage men’s cooperation in order to improve women’s role in Microfinance Development Programme.

Paper 5 : The Opportunities and Pitfalls of Microfinancing in Developing Countries (The Zimbabwean Experience)

Speaker 5 : Joseph W. Nyamunda, SEDCO, Zimbabwe

The key points of Mr.Nyamunda’s paper are as follows :

  1. Main players in micro financing include NGOs, private sector and public sector.

  2. NGO sector has been making significant contribution to micro-financing by extending the programme to the poor.

  3. To ensure the programme is effective both in lending and repayment, a community based approach is mostly used.

Suggestions :

  1. Deregulation is needed to allow private sector play more role in micro financing.

  2. Government should deal with administrative matters while autonomous bodies like NGO can be financially strengthened and be engaged into much bigger wholesale lending programmes.

  3. The establishment of  Microfinance Institution Association should be encouraged.

Paper 6 : NGO Role in Capacity Building as a Strategy for Reducing Poverty

Speaker 6 : Emil C.S. Anthony, Sarvodaya, Sri Lanka

The important points from Mr. Anthony's papers are :

  1. The poor households demand micro credit not only for income generation but also for consumption smoothing and to meet expenses related to life cycle events.

  2. In meeting client demands, a “credit plus” approach is adopted in which there is a linking of credit with training and enterprise development services.

  3. There are three types of micro credit facilities for, i.e.: income generation, consumption loans to improve quality of life, and creation of employment by expansion of existing small businesses.

  4. Sources of fund for lending are members’ savings, borrowings from financial institutions, and accumulated capital

Mr. Anthony recommended the followings :

  1. Micro credit institutions should be managed as business organizations and should have a commercial orientation. There should also be professionalism in the management of such institutions.

  2. Micro credit institutions should be ‘focused’ with a commitment for self-sustainability. It shoud not engage in a multitude of welfare activities, which dilute the level of focus and intensity

  3. Micro credit borrowers should be treated as clients and not as beneficiaries.


Session 2 : PANEL PRESENTATION ON “Government Support to Micro Financing

Paper 7 : Government Support for Micro Credit Financing (The Legislative Environment)

Speaker 7 : Divanandum Prabha Chinien, Company Division, Mauritius

The main points addressed by Ms. Chinien are as follows :

  1. Government’s sponsorship and a proper legal environment are pre-requisites for uplifting the standard of living of the poor and promoting the growth of SMEs.

  2. In order to provide the necessary support, the government has recently introduced a number of flexible provisions in the new Companies Act which allows a company with one person. This structure serves as a marketing tool as well as providing easier access to financial institutions.

Ms. Chinien suggested the following ideas :

  1. The creation of a statutory organization whose prime objective is the promotion of local goods and services is a form of support by the government to SMEs.

  2. Government should encourage big outlets and multinationals to source their products locally from micro and small enterprises. Appropriate incentives may be given to encourage such a practice.

Paper 8 : Microfinance : The Indian Experience

Speaker 8 : B.S. Bhasin, State Bank of India, India

The main points from Mr. Bhasin’s papers are as follows :

  1. The concept of “Priority Sector” broadly covers microfinance, agriculture/rural and SME sectos.

  2. The government supports microfinance activities and other private sectors through commercial banks by requiring them to lend 40% of their credit to priority sectors, subsidising the banks which provide micro credit and  requiring low interest rate.

Mr. Bhasin recommended the following :

  1. There should be an integrated approach in building on micro credit practices. Government can play its role by creating a specialized institution.

  2. There should be programme enriching by international experience of South-South Cooperation.


Session 3 : PANEL PRESENTATION ON “Role of Women in Micro Financing

Paper 9 : Rural Women’s Empowerment through Microfinanace: The Case Study of ENOWID

Speaker 9 : Magdalen A. Abrokwa, ENOWID, Ghana.

The main points addressed by Ms. Abrokwa are as follows :

  1. A new generation of micro-finance for widespread poverty and women’s empowerment is emerging in NAM member countries.

  2. Some considerable impacts of microfinance on the lives of women and their dependants among others include increased productivity of women, creation of jobs, improved literacy level, improved social interaction, cultivation of saving habit, and minimizing  the predominance of money lenders.

  3. Low lending capital is about the biggest challenge of microfinance institutions

Ms. Abrokwa suggested the following ideas :

  1. Government needs to acknowledge the unconventional nature of micro-finance for the poor and facilitate the vital role that private micro-finance institutions can play in poverty reduction.

  2. At the operational levels, MFIs targeting women should reckon with the fact that women’s business strategy is conditioned by time constraints and concerns about daily household welfare and that women are more likely to persue risk-averse strategies.

Paper 10 : Micro Credit Scheme: The Experience of Amanah Ikhtiar Malaysia

Speaker 10 : Saad Ishak, Amanah Ikhtiar Malaysia, Malaysia.

The main points addressed by Mr. Ishak are as follows :

  1. AIM puts into practice a Specialized Credit Delivery System which places a number of certain requirements.

  2. The specialized credit delivery system requires qualified staff.

  3. The impact studies show  a noticeable increase in income among the credit participants.

  4. AIM has benefited cooperation and support from the government especially in the field of financial support, research and study of poverty and technical assistance

Mr. Ishak suggested the following ideas :

  1. A rigorous, practical staff training is required

  2. Cooperation among NGOs and government should be enhanced

Paper 11 : Mobilising Micro Credit Facilities to Help Women in Business Development in an Urbanised Society

Speaker 11 : Sree Vithya Harilingam, TCC Ltd, Singapore

The key points of Ms. Harilingam’s papers are as follows :

  1. In urban states, most poor people in developing countries depend their incomes on the informal sector, typically micro-enterprises in services manufacturing and trading.

  2. In an urbanized society micro financing serves for some pporpuse such as training women on business skills and management, providing market information, coordinating skills training for entrepreneurs, maintaining quality of products and introducing marketing strategies.

  3. The credit beneficiaries especially women see financial independence and continual personal development as a springboard for total emancipation of women.

Suggestions :

  1. There are some areas to be achieved to sustain people’s involvement in micro-financing schemes i.e: “service to members” programs, member education, involvement/governance, diversity, commitment to the credit union movement, and public service/corporate responsibility.


Session 4 : PANEL PRESENTATION ON “Philosophy and Technical Aspects of Micro Credit Services

Paper 12 : Philosophy and Technical Aspects of Micro Financing

Speaker 12 : Yusuf Nawawi, Bank Rakyat Indonesia, Indonesia

The main points from Mr. Nawawi’s papers are as follows :

  1. In practicing microfinance, there should be an understanding of the structure of the poor. Technically  the poor is devided into two groups : a) the poorest of the poor, and b) economically active poor.

  2. Financially services microfinance can be divided into two groups : a)poverty alleviation programme and b) commercial microfinance. Mixing up these two groups will create problems such as deteriorating market mechanism, creating moral hazards and wasting limited resources.

  3. Micro finance needs a multi-dimensional approach; including sociological and cultural approaches – using the financial approach alone is not enough.

  4. Some contributing factors to the failure to establish a sustainable microfinance are the lack of understanding about the market, over emphasis on short-term goals, and mixing-up political goals with business objectives.

  5. Credit is no magic cure for poverty. There are more basic constraints such as knowledge, health, access to market. Only if the capital is the last scarce factor the impact of borrowing can be very high.

  6. The provision of credit subsidy has proven to be generally unnecessary. What matter most is effective access to credit whenever the households need it.

Mr. Nawawi recommended the followings :

  1. A market-driven approach is which argues that credits will only be helpful if business activities are already in place should be adopted. Simply put, banks or financial institutions should follow where the businesses are.

  2. Factors to be considered to create sustainability in micro finance business are :

  • There should be enough margins to cover all of the business costs

  • Setting-up a careful pricing policy

  • Prudentially managed

  • Financial self-sufficiency/have enough sources of funding

  • Simplicity principle in all aspects of the operations

  • Transparency at all levels

  • Providing extensive and easy access to financial services ( a large number of outlets is needed).

  1. Promoting micro enterprises is to establish a linkage between micro enterprises and big corporation as a win-win basis.

  2. Implementation of Information Technology should be in place to enable access information about market.


Paper 13  : Philosophy and Technical Apects of Micro Credit: The Experience of Bangladesh

Speaker 13 : Shabbir Ahmed Chowdhury, BRAC, Bangladesh

The main points from Mr. Chowdhury's papers are as follows :

  1. BRAC applies a credit plus approach provides the poor not only with financial support but also with technical assistance, marketing assistance and a regular supply of inputs.

  2. Approach to holistic sustainability is to enhance sustainability of the programme participants as well as the sustainability of the micro finance organization itself.

  3. In order to bring the rural poor into the mainstream of development, one of the strategies is to focus on institution building. In BRAC’s case a concept of Village Organization is introduced.

  4. BRAC also touches the so called ‘missing middles’ who neither belong to the target group of MFI, nor have much access to formal financial institution. They usually show great promise and entrepreneurial ability but not keenly interested to go to formal financial institution becaue of the bureaucratic procedure.

  5. MFI are getting more commercialized. Competition among MFIs creates  more default loan and high delinquency rate.

  6. Growth of micro finance is not being supported by the growth of human resources

Mr. Chowdhury recommended the followings :

  1. MFI should invest in a strong management information system to meet the challenges of rapid expansion.

  2. Promote competencies of practitioners and professionals of MF.

  3. A friendly regulatory framework of micro finance should be in place.

  4. A specialized package which consists of asset transfer, employment and enterprise development training, social safety net, and health care provision should be in implemented to target the ultra poor.

Paper 14 : Initial Results and Experiences in Computerized Implementation of Micro-Credit Schemes of the Vietnam Women’s Union

Speaker 14 : Cao Thi Hong Van, Women’s Union, Vietnam

The main points from Ms. Cao’s papers are as follows :

  1. It is essential to computerize the credit/saving management system to reduce workload , time-consuming of credit officers and reduce unpractical reports which in the longer term will reduce operating costs.

  2. Initial support by the donor is a fundamental need to apply a computerized management system.

Ms. Cao recommended the followings :

  1. It is feasible to apply a computerized management system in micro finance sector, even in the context of developing countries and with a non-banking institution.

Paper 15 : The 40 Year Journey of Purba Danarta (Lesson Learned)

Speaker 15 : Delima Kiswanti Soebardi , Bank Purba Danarta, Indonesia

The main points of Ms. Kiswanti’s paper are :

  1. Financial aid that comes too easily would not promote development process.

  2. Additional income will not automatically improve the welfare of the people.

  3. Empowerment of the poor should start from the proper management of their household economy.

  4. Obtaining a loan without proper business management could be dangerous to the business itself.

Ms. Kiswanti recommended the following items :

  1. An income management for the small people should be introduced.

  2. A concept of “expenses are income minus saving” should be introduced to help small people managing their cash-flow.

  3. A simulation training for small entrepreneurs is recommended.

Paper 16 : Microcredit Schemes in Negara Brunei Darussalam as Condtucted by Islamic Development Bank of Brunei Bhd.

Speaker 16 : Pengiran Hj. Basmah Abbas, IDB of Brunei Bhd, Brunei Darussalam

The main points from Ms. Abbas papers are as follows :

  1. Micro credit is targeted to  micro enterprises and also to youth and retirees.

  2. Promotions of micro credit is conduced through a series of marketing activities such as TV programme, printed media and internet.

  3. Another attractive financing  facility is in a form of short-term borrowing by pledging an item such as gold jewelry as collateral.

Ms. Abbas recommended the followings :

  1. Project monitoring should involve other bodies such as government and other relevant departments.