Gates Foundation Provides $700,000 to Document Success of Microcredit

Photo: Nobel Prize winner Muhammad Yunus, widely acknowledged as the father of microcredit.

The Microcredit Summit Campaign was the recipient of a $700,000 grant from the Bill and Melinda Gates Foundation.  The grant will help the Campaign measure progress toward its goal of ensuring that 100 million families rise above the $1 a day threshold by 2015.

As many as two billion people living on $1 a day or less do not have access to financial services that can help them increase their financial security and improve their lives. Without services like loans, savings, or insurance, it is difficult for families to save and pay for necessities like educational fees, medical bills, household improvements or emergencies.

The Movement "Above $1 a day Project" was created in 2006, after the Campaign set new goals for 2015 at the Global Microcredit Summit in Halifax, Canada, to effectively document, through standardized methodologies, the number of microfinance clients who are pulling themselves out of extreme poverty One methodology includes training microfinance institutions (MFIs) in poor countries with "poverty scorecards," which measure borrowers' levels of poverty through questions such as what the client's house is made of, how many of their children attend school, and whether anyone in the household works for a daily wage.  So far, the Campaign has trained 25 institutions from seven countries in Asia on the poverty scorecard.

Another methodology calls for establishing expert panels.  The purpose of the expert panel is to develop a credible methodology in estimating the number of microfinance clients who crossed the $1 a day threshold between 1990 and the current year. The Bill and Melinda Gates Foundation grant will allow for the formation of these panels and implementation of a research exercise or study based off of their recommendations.  The first such panel was created in Bangladesh and convened in April, 2008.  Made up of top Bangladeshi researchers, the panel agreed that a nationwide, recall survey should be implemented to determine client progress The Microcredit Summit Campaign is currently forming an India Expert Panel and plans to form an Expert Panel in Ethiopia in 2009 with the same mandate.

The Microcredit Summit Campaign annually documents how many people around the world have received a micro-loan. The organization's last report found that in 2006, microfinance institutions reached 133 million clients around the world, 93 million of whom were among the world's poorest people when they took out their first loan.

"We have the data to support the idea that microfinance is an extremely important way to provide desperately poor families with dignified means to become self-sufficient," said Microcredit Summit Campaign founder Sam Daley-Harris. "What was missing was the data that showed how many of these families were able to pull themselves above the dollar-a-day threshold. The resources provided by the Gates Foundation will help us do just that."

Once the poverty scorecards are implemented and expert panels established in the target countries, the results will be reported annually in the organization's State of the Microcredit Summit Campaign Report, starting in 2010.