A German bank's micro-financing foundation is now celebrating its 20th year. One German minister seems to think they' have been doing things right.
While bold, the comparison is in no way erroneous: Many emerging and developing countries now find themselves in circumstances that reflect Europe's own at the beginning of industrialization 200 years ago. Urbanization, mass poverty, hunger and rapid population growth were the primary characteristics of an epoch few miss.
Such phenomena are contemporary, though, for many Africa, Asia and Latin America. 870 million people - 12 percent of the world's population - suffer from hunger, statistics show. That number represents a six percent improvement on the beginning of the 1990s. Success in the war on poverty can now be statistically corroborated.
Yet Germany's development minister, Dirk Niebel, is not content to simply play with numbers. Since his cabinet appointment in 2009, the free-market liberal Free Democrat Party politician has put the private sector at the fore in his own fight on poverty. His critics, among them politicians and NGOs, accuse him of elevating private sector interests at the expense of the poorest of the poor.
Microcredit in Madagascar
Outwardly Niebel appears unflustered, though. He plans to hold the current course - a strategy that plays into the hands of the Sparkassenstiftung, the foundational arm of Germany's network of public savings banks. Since 1992 the Bonn-based trust has supported worldwide financial and structural development projects.
According to its own data the foundation has been engaged in over 60 countries in the last 20 years. Of primary importance is the dispersing of credit to small and middle-sized businesses. Projects were - and will continue to be - financed through a combination of the foundation's own capital, private donations and, above all else, through funds provided by the Development Ministry. In total, the ministry has steered 37 million euros ($48 million) toward the foundation since its establishment in 1992.
Chief executive of the foundation Niclaus Bergmann is pleased about such consistent - and ever-growing - financial blessings. He believes that cooperating partners throughout the world will directly benefit from the support. As his foundation targets the dual goals of developing technical infrastructure and educating the workforce, the question remains: Where to begin?
Emerging countries like Mexico are fundamentally further along than African countries, Bergmann said. That's why each project is fine-tuned to meet local development needs. In Madagascar for example, the foundation's task was to help the state-owned post office bank promote credit lines for those with a history of saving. Another point of focus in Madagascar is the opening of new branches outside of areas of high concentration - so that small-business microfinancing can function in the country at all.
A billion dollars for Azerbaijan
The Sparkasse foundation's cooperation with Azerbaijan, however, took on a completely different dimension. For the last five years local banks in Azerbaijan have been supported in handing out loans for construction and demolition projects, Bergmann said. In collaboration with more than 10 partner institutes around 250,000 loans worth more than one billion dollars (763 million euros) have been delivered. According to Bergmann, the chief beneficiaries have been small towns and localized economies outside the capital, Baku.
Such examples fit development Minister Niebel's bill. Niebel backs cooperating with the private sector whenever possible, and in his conception of the fight against poverty, it's the private sector that ultimately plays the decisive role. The best way out of misery, according to Niebel, is through employment and a steady source of income.
Getting there, though, requires a few prerequisites. Investments in health and education programs are Niebel's top priorities and the two pillars of the ministry's strategic initiatives.
Not only Niebel's smiling
For years, all of these elements have belonged to the classic repertoire of development work. The essential difference, however, is that the sitting minister has continually strengthened the role that the private sector plays in that development.
The Sparkasse foundation's long-term commitment and concomitant financial support is reason to celebrate, even for many of the critics - especially since, according to recent indications, the loans have benefited small and middle-sized businesses significantly. In most case, those businesses are made up of just one person.
All of which is why the Sparkassestiftung sees itself as a "pioneer of microfinancing." Niebel certainly seems to think so, too.