Microfinance Offers the Poor a Way Out of Poverty
by Her Royal Highness Princess Basma Bint Talal

If we are to help poor people overcome poverty, as so many nations have pledged to do, we must recognize that it is important to them to have the means to find their own solutions. Microfinance is a powerful aid in doing this. It gives poor families a chance to improve their livelihoods through their own economic activities.

Often, the one thing preventing the poor from raising their standard of living is lack of access to financial services that would help them start or expand their businesses or prevent risks. Here in our own country, a study shows that most women engaged in microenterprise activities in Jordan reported that lack of capital was the biggest problem they face in their business. Among other things, it prohibits expansion or employing others. In the North Africa and Middle East region alone, there are 60 million poor people, but only 112,000 have access to financial services.

The benefits that microfinance bring to poor families goes beyond increased income and employment. It also provides greater opportunity for children to go to school, for families to obtain health insurance, and for the poor to make choices that best serve their needs. For many women, microfinance proves to be a powerful instrument of social change. More and more we see women from traditional societies being drawn into commercial economic activities. In many cases, this is due to a small loan or savings or other service provided by a credit union, women’s cooperative, or peasant organizations, which allows them to start or maintain a business.

Despite popular notions that the poor do not have any use for financial services, they need saving, remittances, and other services, and they do not represent a high credit risk. In fact, repayment rates are higher among clients of microfinance institutions than those of commercial banks. Poor women often have the best credit ratings. Nevertheless, nearly half the people in the world do not have access to basic financial services simply because they are not available to them.

In order for the microfinance industry to be able to answer to the needs of poor people in our region of the world, it is imperative that we help to build this sector of our economy. We must strive to increase the efficiency and sustainability of microfinance programs and to encourage formal financial institutions to provide savings, remittances, loans, and other services to poor people.

Microfinance programs may be an effective way to answer broader social issues while improving the lives of many poor families. Programs like one I know about in Algeria , supported by the UN International Fund for Agricultural Development, aims to reduce unemployment among young people in rural areas. Given the large population of unemployed young people in Algeria , this is an especially important initiative.

It well understood that microfinance is not a "magic pill" to cure poverty, however, it has the potential to help poor people lift themselves out of poverty.

Her Royal Highness Princess Basma Bint Talal is the only sister of His Majesty the late King Hussein. Princess Basma believes in fostering models of socio-economic development that increase community participation and improve the quality of people’s lives, especially in needy rural and over-populated areas.