http://news.yahoo.com/news?tmpl=story&u=/afp/20050222/bs_afp/agakhanbankingfinance_050222190410
Yahoo! News
Tue, Feb 22, 2005
Business - AFP
A new non-profit microfinance agency would deliver micro-insurance, small housing loans, savings, education or health accounts, and study new ways of providing a range of financial services to poor communities, he announced.
"Loans to health and education can break down the barriers to access to those services for the poor," the Aga Khan told journalists.
His foundation already runs a development agency that delivers microcredit to poor people in 20 developing countries. It managed 25,000 loans last year valued at about 30 million dollars.
Microcredit involves tailored small loans to poor farmers, would-be entrepreneurs and others who would otherwise have been ineligible for credit from commercial banks using traditional means of evaluating credit-worthiness.
It has been used by returning Afghan refugees to start businesses, by Tajiks to finance better farming, or residents of a poor district of Cairo to refurbish homes or gain skills, according to the agency.
The Aga Khan insisted that microcredits had helped millions of poor people, but did nothing to give them security against the loss of crops, the death of a family member, or a natural disaster like the tsunami in south Asia.
"By creating a wider range of better targeted products such as micro-insurance, the poor will have the ability to protect their assets," he said.
"Other products such as savings accounts, education and housing loans will help them improve their quality of life," he added.
The project was backed by James Wolfensohn, the president of the World Bank, at its launch in the Swiss city of Geneva.
He said an expansion into other areas of financial services heralded "a new dawn for microcredit".
"We're going beyond lending women in developing countries 50 dollars for a few chickens or a sewing machine," Wolfensohn said.
"We're taking a financial product and making it available to the poor and not just the rich," he added.
Critics have charged that microcredits reach only a fraction of the world's poorest and fail to address the root causes of poverty, while some bankers have doubted its commercial viability.
But backers say it offers an opportunity for the poor who want to help themselves.
A World Bank study has indicated that successful microcredit programmes for women in Bangladesh could help them to develop a business from a 100 dollar loan, double family income and climb out of poverty in five years.
Wolfensohn cautioned that microcredit programmes needed to be well managed. Some governments also had been unnecessarily reticent about adapting their legal framework to allow microcredit agencies to function, he added.