Australian aid strategy aims to give better access to finance for poor
Updated
Australia's aid strategies to the region for the next five years will endeavour to give the region's poor better access to financial services. Improving access to financial services is an import key in the reduction of poverty and achieves another of the Millennium Development Goals. The 'Financial Services for the Poor: A strategy for the Australian aid program 2010-2015' was launched in Canberra this week.
Presenter: Geraldine Coutts
Speaker: Bob McMullan, Parliamentary Secretary for International Development Assistance
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MCMULLAN: It specifically refers to the importance of initiatives like micro-finance that can get money out to individuals to setup small enterprises so that we empower poor people in communities around our region to work their way out of poverty.
COUTTS: And so this would include subsistence farmers and fisher people as well?
MCMULLAN: We're not going to give the money directly, what we do is strengthen community organisations that are providing financial support or we provide assistance to banks to provide a support to poor people. But if a farmer or a person involved in fishing came forward and said we would like to borrow a small amount of money to one of these institutions for a worthwhile purpose that meant they could pay it back, that would be fine with us. We are not going to setup an Australian government lending agency, we think it's much better done at a community level, but we will provide support and assistance to community level organisations, we do already around the Pacific to deal with issues like micro-finance, like micro-insurance, crop insurance for people, those sorts of propositions.
COUTTS: Well what are the eligibility qualifications?
MCMULLAN: Well as I say we're not going to, it's not going to be an Australian government thing, we will fund what the community organisations want to do but we don't envisage that there'll be any barriers to ...
COUTTS: I was really wondering whether it would be an NGO that would apply for the money and then dispense the money on behalf of individuals?
MCMULLAN: It's often NGOs but sometimes there's different ways you can provide assistance. I was recently in Vanuatu and the National Bank of Vanuatu we're working with them to just upgrade their communication system so they can provide good banking services to people in the outer islands, because there are people with good ideas in say banks, that is the bank's islands in Vanuatu, who can't get effective access to banking services to borrow money to build their business. And so they'll be a multitude of ideas, but yes we will be any viable micro-finance or finance institution that has a good idea will be welcome to talk to us about it.
COUTTS: Women often are the largest contributors, especially in the rural areas to their communities, but it's little recognised and these women are also most in need of a bit of cash sometimes to get their businesses going. Is this an area that you will be hoping would be beefed up through this scheme?
MCMULLAN: I'm absolutely certain that you will find that the majority of the beneficiaries will be women, not because we need to write a rule to say so, that's how these schemes work best. At a function I spoke at, famous Professor Yunus who's the father of micro-finance was there, and in his scheme in Bangladesh they started out with an ambition of getting 50-50 men and women, they wound up with 97 per cent of the loans going to women.
COUTTS: So through these schemes, because I think in your paper you also say that a quarter of the world's poor is in a region, Asia Pacific region, that's still pretty high compared to 1990 when it was half. How much of an impact could these kinds of schemes have on those figures?
MCMULLAN: Not just our scheme but the proliferation of this idea, this powerful idea that we need to make credit and financial services available not just to wealthy people but to poor people, is a transformational idea. In Bangladesh it's been very powerful, in a smaller way in other parts of the world it's been powerful, and it is working well in the Pacific. In PNG we've got a micro-finance and employment project that's successfully linked 35 small village based providers, and this is helping them provide assistance to the poor. And the number of people making deposits has grown from 45-thousand to more than 300-thousand. So the ability to save money effectively is critical it can transform the lives of people to pay things like school fees, health costs or just to create new opportunities for growing their business. So it is a powerful transformational tool, it's not a magic wand but it can transform the economies of countries and the opportunities for people.
COUTTS: Mr McMullan you mentioned earlier in Vanuatu the lack of access in some islands which is probably endemic right across the Pacific, access to banking facilities, and you also say in your speech that business can directly target the poor in different ways. But banks and larger corporations aren't known for their philanthropy or corporate social responsibility. Is this something also that needs to be targetted and the banks, especially sort of telecoms, worked on to break the monopolies that exist that are preventing some of the poor access to these services?
MCMULLAN: There are two different points in that question, they're both important points; you shouldn't underestimate the extent to which banks, and I of course know most about the Australian banks. Australian banks do exercise corporate social responsibility, Westpac has been international recognised as one of the leaders globally in corporate social responsibility amongst banks, and it's taking some initiatives in the area. We're working with ANZ Bank on some initiatives in a bit more broader than the Pacific, the particular example I have in my head is in Cambodia about providing financial services to the poor. So on that side of it I think we can find the major corporations being alert to their responsibilities. But it's also a financial opportunity for them, if they get effective financial service to the poor what they've got is more customers and more savings. So they also can see a social responsibility and an economic opportunity. But your other very important point is about breaking down the monopoly in the provision of things like mobile telecommunications, because mobile telecommunications is a great liberating technology that enables people to do business from where they are and as we are transforming around the region the provision of telephone services. So people are being empowered, the remittances can be transferred more cheaply, people can communicate with their bank more effectively, they can communicate with their customers more effectively, they can get information about what's going on in the world more effectively. So yes, getting good regulatory frameworks for banks, for telecommunications, that is really critical and it's improving around the region, and many countries are already doing very good work in this area but there's room to do more.
COUTTS: Professor Helen Hughes says aid is not a good idea and it's never worked in the region. What would you say to that in response to the kinds of programs that you're talking about today?
MCMULLAN: Well I think Professor Hughes is really arguing to knock down the model that's probably been out of existence for 30 years. Modern development assistance is not the sort of thing that she's criticising. Initiatives like helping people create their own business, helping people get access to finance so they can make choices about their lives, that does have a track record of working. There's a lot of success, Bangladesh is the most obvious example, but all around the region from Africa, in Latin America, in South Asia, in East Asia, in the Pacific; these programs do work, they do make the lives of individuals better, and you can take anybody to villages that I visited in Indonesia, in Vanuatu, around the world where these projects are making people's lives better.
