World Bank Director Paul Wolfowitz joined other leaders in international development at United Nations Headquarters today to call for an inclusive finance services in developing countries to reduce poverty at a forum on expanding microcredit, or small-scale services for poor entrepreneurs.
"Microfinance is a powerful tool for reducing poverty," Mr. Wolfowitz said as he opened the three-day meeting, a highlight of the International Year of Microcredit 2005. "It enables people to increase their incomes, to save and to manage risk. It reduces vulnerability and it allows poor households to move from everyday survival to plan for the future."
He stressed the need for reliable, continuing access to financial services for the poor, rather than one-off loans. He said the World Bank had published a report focusing on the myriad regulations and fees hindering small businesses, which could help governments in identifying obstacles that should be removed in providing those services.
Emphasizing that the financial infrastructure must also establish credit bureaus, delivery technologies and payment systems, he said the World Bank was advising both the public and private sectors on providing the poor with financial retail products. Although financial services were primarily a private-sector activity, governments had a critical role in setting policies and regulating the industry to minimize market distortions.
During the International Year, the World Bank and the Consultative Group to Assist the Poor are working with national committees around the world to host a series of events and conferences to highlight the importance of microfinance in the fight against poverty, as they also develop strategies and resources to reach an estimated 3 billion people who lack access to formal financial services.
In past decades, the World Bank says, microfinance has evolved from the provision of small loans to help start businesses to a vision of creating financial systems where none exist.
Microfinance, according to the Bank, is driven by the simple idea that people in developing economies need access to affordable financial services that allow them to make deposits, transfer funds between urban and rural areas, protect themselves through crop and life insurance, and invest in what they consider most important. Often, the lack of access to these services inhibits individuals from managing risk and planning for the future, and does not provide an important buffer for sudden emergencies, business risks, and seasonal slumps.
Princess Maxima of the Netherlands, a strong supporter of the International Year, said at today's event that the commemoration was a huge step forward in providing the entrepreneurial poor with financial services, which were as vital to economic development as roads and electricity.
"By enabling entrepreneurship and empowering people, microfinance gives people the opportunity to determine themselves what is best for them. People do not want handouts, they want opportunities."
Among panellists for the meeting are experts from public and private sectors, leaders of non-governmental organizations and successful micro-entrepreneurs from Afghanistan, Bangladesh, China, India, Liberia and other developing countries. They will receive awards from celebrities including Jennifer Lopez, Marc Anthony, Walter Cronkite and Chelsea Clinton.
Former President Bill Clinton is also expected to participate in closing ceremonies Wednesday.