Global Economy Tests African Microcredit Channels
Lesser, H.

Amid growing signs that the global economy is worsening, some of Africa's poorest nations are struggling to lower earlier projections of economic growth by focusing on how to satisfy the basic day-to-day needs of their citizens. One avenue for attracting investment needed to keep capital flowing in to local African businesses and public works is the practice of microfinance.

Director of the Microcredit Summit Campaign Sam Daley-Harris says that tightening pressures are being felt even in low-end borrowing circles and that such small but essential programs that can make a difference for Africans facing dire poverty are also feeling the effects of the global financial pinch. He says there are varying degrees to which the crisis is being felt. In parts of Africa, he notes, the crunch is leaving its mark, especially when it comes to food shopping and diet. "We took a survey very recently, where we asked about the global economic crisis. But we also asked about rising food and fuel prices. And it was becoming clear that microfinance institutions that borrow from banks are facing higher interest rates and in some cases, drying up funds. This has this cascading effect as to when the banks are charging more for their interest, the microfinance groups have to decide, do we cut costs and not pass the higher interest rates on," he said.

To weather the latest pressures, Daley-Harris says African leaders need to act quickly to hold own rising bank costs and interest rates and to make sure that adequate investment flows in the credit market continue to be available to low-end borrowers, "in getting the regulatory environment such that microfinance groups could take an 'on-lend' savings."

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