The Microcredit Movement: A Canadian Perspective
Over the past year, attention given to the international microfinance industry has continued to be fixated upon scandals – such as the suicides among borrowers in Andhra Pradesh, India – which led to the ‘great Indian microfinance crisis.’ Despite significant industry efforts, as of August 2011 the situation in Andhra Pradesh had only improved slightly.
Microcredit, one of a broad range of financial services encompassed in microfinance, (which includes other services such as savings programs and insurance), focuses on providing access to loans. One trend that has emerged from the Indian microfinance crisis is a shift from focusing merely on providing access to loans, to considering their social impacts. While no single universally-accepted social impact measurement tool has been created as of yet, more and more institutions are finding value in building social indicators and metrics for decision-making purposes.
In contrast to India, where there is a significant supply of micro finance services, credit unions may be the primary providers for microfinance services in Canada.
For Alterna Savings, a Canadian credit union, microcredit is only a small part of their offering – from which they generate no year-over-year profit. However, after recently speaking with some Alterna team members who administer the organization’s microcredit program, I learned that the purpose goes beyond profit. Simply put, the significant social benefits generated for Alterna’s loan borrowers – such as job creation and decreased dependency upon social programs – justify the program’s continuation.
Alterna Savings anticipates that in the future, social impact will become a key assessment criterion when giving loans – while also recognizing that social impact measurement comes with challenges of its own. Alterna’s perspective was reinforced at the 2011 Microcredit Summit in Spain, where microfinance institutions and donors stressed the need to create innovative ways to assess the projected and realized social impacts of giving loans.
Despite Alterna Savings’ impressive track record with microcredit in a Canadian context, a considerable unmet demand for micro finance services continues to exist.
Muhammed Yunus, Founder of the Grameen Bank and microfinance pioneer, said in 2010 that he sees an opportunity in Canada for microfinance services to address the economic challenges of immigrants and Aboriginals, two Canadian demographics most vulnerable to poverty. In recognizing these opportunities, the PARO Centre for Women’s Enterprise has been actively providing microcredit to numerous Aboriginal communities in Northern Ontario, providing nearly $1 million in loans to over 1,500 individuals in 2011. But PARO’s work is just beginning to make a dent in a largely unreached Canadian microfinance market.
Microcredit – both international and domestic – has many complexities and is too often oversimplified as just the provision of loans to the disadvantaged. By better measuring the social impact of micro loans, some of its complexities will hopefully become better understood.
Here in Canada, this begs the question of whether 2012 will see more impoverished individuals particularly immigrant and Aboriginal communities, with greater access to loans and financial services. We must recognize, however, that microfinance is just one poverty-fighting tool and it must work in conjunction with other initiatives to truly succeed.
What is your anticipation and hope this year for microfinance within your own community and beyond?
Photo credit: http://www.flickr.com/photos/hodag/3403343295/