The year 2005, when the signatory states of the Millenium Declaration take initial stock of what has been achieved so far, has also been declared by the United Nations as the International Year of Microcredit. The reason is simple: Strengthening banking institutions for poor and underprivileged people in developing countries is an effective way to reduce poverty. Where the poor lack access to financial services, they depend on informal moneylenders, who usually charge high double-digit interest rates. Borrowers can easily be caught in a debt trap. Microfinance services contribute directly to reducing extreme poverty by improving the income of poor people (MDG 1). Thanks to higher and more stable income, parents can also invest in giving their children school education and training (MDG 2) and pay for health services (MDG 4 – 6). The main beneficiaries of microfinance services are women, so they contribute to women's empowerment and gender equality (MDG 3).

Practical experience

Since the nineties, GTZ has recorded considerable successes in setting up and developing of financial systems and finance facilities for micro and small enterprises. Thanks to the "Rural Financial System Development" Programme, for example, 80 million rural poor have been able to avail themselves of formal financial services in India. By simultaneously strengthening capacities in productive agriculture, the financial sector and in administration, the Mali North Programme has contributed to reducing poverty and raising the social status of women.