Microfinance from a Human Rights Perspective

Christopher Dunford points out in "A Failure to Communicate: Microfinance Confused" (May 2011) that public expectations of microfinance as a poverty solution have been greatly downsized. However, we believe microfinance programs offer much to celebrate and build upon-though we must look beyond nominal financial benefits.

Indeed, microfinance programs are one important tool that can alleviate economic duress enough to allow people to meet their basic needs, shift towards savings and invest in new or growing businesses. But poverty is not a purely economic phenomenon. Programs aspiring to alleviate poverty must also consider the social, cultural and structural dimensions of poverty that keep marginalized populations from overcoming barriers to economic self-sustainability.

Microfinance programs that hold human rights objectives at their center-not poverty reduction-can help move people out of marginalization and attain wide-ranging social benefits.

Such initiatives, especially in the form of revolving loans when controlled by local communities, can build solidarity. In countries or regions governed by oppressive regimes, the resulting cooperation can lead to changes in how communities and authorities interact.

In places where the political environment makes it difficult or even dangerous to work with local communities on human rights initiatives, community-controlled microfinance can be a safe and unobjectionable entry point for working on additional issues. These programs can provide both an incentive and a shelter for communities to come together and they can enable local, national and international NGOs to work with affected populations.

Services such as health and education, which have human-rights outcomes, can be linked successfully with microfinance programs. For example, in western Kenya, following the 2007-2008 post-election violence, a grassroots organization mobilized women who had been displaced and lost their livelihoods in the crisis. The women's participation in revolving loan funds  helped them start small enterprises and gave them access to business training, counseling, family tracing and HIV testing.

We have seen community-controlled microfinance programs serve as a basis for collaboration and empowerment in places challenged by political and ethnic rivalries. The multi-ethnic Kenya National Alliance of Street Vendors and Informal Traders managed revolving loan funds for over 1,400 of its members affected by the post-election violence, representing more than six ethnic groups. Through this initiative, beneficiaries and other alliance members worked together to reconcile and build peace in the wake of the crisis.

In Myanmar, amidst political strife and extreme poverty, over 50,000 people in more than 150 conflict-affected communities have initiated revolving loan funds that have enabled them to begin meeting some of their most basic needs. In the process of working together, people are confronting their common challenges. They have been able to circumvent middlemen by buying in bulk, offset teachers' salaries and collectively negotiate with officials. Trust and reconciliation are increasing and communities are developing future plans.

Dunford also writes that commercial microfinance institutions are reluctant to acknowledge the social value of micro-loans. But as we have seen, community-based revolving loans with economic growth linked to human-rights objectives can produce returns for marginalized communities as well as for investors.

Ariel Jacobson, Senior Associate for Economic Justice and Gretchen Alther, Senior Associate for Rights in Humanitarian Crises, Unitarian Universalist Service Committee