Several thousand people are attending this week's Global Microfinance Summit in Halifax, Canada. The summit's purpose is to assess the role of small loans in helping people who do not normally qualify for financing to start their own businesses. In Senegal, so-called microcredit unions are popping up in neighborhoods and villages that traditional banks have shunned. But not all microfinance supporters believe it offers quick solution for development problems. Jordan Davis reports from Dakar.
In her tiny home behind a market in the Dakar suburbs, Rokhaya Mboup is hard at work. Sewing, she says, is her passion. But to turn that passion into an income, Mboup needed a sewing machine and fabric.
She turned to a local credit union to borrow the $400 she needed. Now she says she earns at least $100 a month, but sometimes she can even make 10 times that if she has a lot of orders.
Mboup borrowed the money from Pamecas, a Dakar-based network of credit unions that lends money and provides savings accounts. Pamecas' communications director, Sagar Tall, says micro-finance institutions have reached out to people who did not have access to banking services.
"For a long time people thought certain neighborhoods were too poor," Tall says. "But our group holds more than $25 million in savings, so clearly people were saving money, they just had no place to put it."
And when the money goes into the bank, it then can be loaned out to someone looking to start a business.
Pamecas started in 1995, funded by foreign donors, with the goal of opening 20 branches. It now is financially independent and runs more than 50 branches.
Pamecas' fast growth reflects the success of Senegal's microfinance sector in recent years. Observers say these credit unions are becoming major financial players in the country.
The concept has gained worldwide visibility since this year's Nobel Prize was awarded to Bangladeshi economist Muhammad Yunus, considered to be the founder of the microfinance movement.
Many analysts praised microfinancing as a way to provide capital to entrepreneurs, and in turn, reduce poverty.
Madina Assouman is with the U.N. Capital Development Fund in Dakar. She believes microfinance is an important long-term development tool, but cautions that it should not be seen as a panacea in Africa, or the rest of the world.
She says it is not designed to fix all the underlying reasons for a lack of economic development.
It cannot fix underfunded schools, or an inadequate health care system, for example.
But leaders at this week's microfinance summit in Canada hope the loans will help them meet an ambitious development goal for the next decade: raising 100 million families' standard of living above one dollar a day.