Resolving the Global Resolving the Global Financial Crisis Financial Crisis

Committee 2Committee 2

• Multilateralism- cooperation Multilateralism- cooperation between nations: between nations: the principle or the principle or belief that several nations should be belief that several nations should be cooperatively involved in the process cooperatively involved in the process of achieving a goal, especially of achieving a goal, especially nuclear disarmament nuclear disarmament

G-20 Summit Washington G-20 Summit Washington 11/15/0811/15/08• The G-20 Declaration of the Summit on Financial The G-20 Declaration of the Summit on Financial Markets and the World Economy on 15 November Markets and the World Economy on 15 November 2008 outlined a roadmap for future action to stabilize 2008 outlined a roadmap for future action to stabilize and reform financial markets, to preserve an open and reform financial markets, to preserve an open global economy, to promote trade, to provide credit global economy, to promote trade, to provide credit and liquidity and to restart economic growth and and liquidity and to restart economic growth and overcome recession overcome recession

• Major focus was on strengthening transparency and Major focus was on strengthening transparency and accountability curbing speculation in currency, accountability curbing speculation in currency, financial and commodity markets; enhancing sound financial and commodity markets; enhancing sound regulation nationally and internationally; promoting regulation nationally and internationally; promoting integrity in financial markets; and reinforcing integrity in financial markets; and reinforcing international cooperation international cooperation

• But the summit also emphasized in the concluding But the summit also emphasized in the concluding section on a “commitment to an open global section on a “commitment to an open global economy” - though almost as an afterthought and economy” - though almost as an afterthought and with rather weak and little compelling language or with rather weak and little compelling language or conviction - on: conviction - on:

G-20 Summit cont.G-20 Summit cont.• A commitment to free market principles which are A commitment to free market principles which are

essential to economic growth and prosperity and essential to economic growth and prosperity and have lifted millions out of poverty; have lifted millions out of poverty;

• The importance of rejecting protectionism and not The importance of rejecting protectionism and not turning inward in times of financial uncertainty; turning inward in times of financial uncertainty;

• The impact of the crisis on developing countries, The impact of the crisis on developing countries, particularly the most vulnerable particularly the most vulnerable

• The importance of the MDGs, the development The importance of the MDGs, the development assistance commitments the participants have made assistance commitments the participants have made

• Urge both developed and emerging countries to Urge both developed and emerging countries to undertake commitments consistent with their undertake commitments consistent with their capacities and roles in the global economy capacities and roles in the global economy

• Reaffirm the development principles agreed at the Reaffirm the development principles agreed at the 2002 Monterrey Conference on Financing for 2002 Monterrey Conference on Financing for Development, which emphasized country ownership Development, which emphasized country ownership and mobilizing all sources of financing for and mobilizing all sources of financing for development. development.

World Bank calls for Aid World Bank calls for Aid boostboost• The World Bank President called on The World Bank President called on

donors to boost donors to boost financialfinancial aid to aid to developing nations which find developing nations which find themselves at the mercy of a crisis themselves at the mercy of a crisis that “is not of their making” that “is not of their making”

• Empowering developing and Empowering developing and emerging countries and economies is emerging countries and economies is imperative imperative

• Helping nations pursue economic Helping nations pursue economic development and long-term development and long-term prosperity should be the goal of prosperity should be the goal of development finance.  development finance.  

The call for “vulnerability The call for “vulnerability funds” funds” • WB President Zoellick proposed in WB President Zoellick proposed in

International Herald Tribune of 24 Jan. International Herald Tribune of 24 Jan. 2009 the creation of vulnerability funds, to 2009 the creation of vulnerability funds, to be fed by developed countries with an be fed by developed countries with an amount of 0.7% of their respective amount of 0.7% of their respective stimulus packages to assist developing stimulus packages to assist developing countries that can’t afford bailouts and countries that can’t afford bailouts and deficits deficits

• The funds should be taken from the The funds should be taken from the dedicated bailout/stimulus packages dedicated bailout/stimulus packages

• This would translate for US to an This would translate for US to an immediate contribution of US$ 6 billion immediate contribution of US$ 6 billion

• WB + Japan launched program to WB + Japan launched program to recapitalize banks in developing countries recapitalize banks in developing countries

Focus of vulnerability fundsFocus of vulnerability funds• Creation of safety net programsCreation of safety net programs• Food-for-work programs Food-for-work programs • Seed and fertilizer projects Seed and fertilizer projects • Maternal and child nutrition projects Maternal and child nutrition projects • School meal programsSchool meal programs• Cash for work programsCash for work programs• Road work and drainage Road work and drainage • INVESTMENTS IN HEALTH, EDUCATION AND INVESTMENTS IN HEALTH, EDUCATION AND

NUTRITION MUST BE MORE THAN TEMPORARY NUTRITION MUST BE MORE THAN TEMPORARY POVERTY RELIEF: THEY ARE INVESTMENTS IN POVERTY RELIEF: THEY ARE INVESTMENTS IN HUMAN CAPITAL HUMAN CAPITAL

• Investments in infrastructure, including financing Investments in infrastructure, including financing for low-carbon technology projects for low-carbon technology projects

• Support small- and medium-sized enterprises and Support small- and medium-sized enterprises and microcredit institutions microcredit institutions

MicrocreditMicrocredit• Provision of small loans (generally USD 50 – USD 550 Provision of small loans (generally USD 50 – USD 550

value in local currency) value in local currency) • Repayment is made over a set period, usually less Repayment is made over a set period, usually less

than one year than one year • Interest is charged (the rate varies with each country) Interest is charged (the rate varies with each country) • No collateral is required, however most group No collateral is required, however most group

guarantee guarantee • Most recipients are women (as they are considered Most recipients are women (as they are considered

food providers of family) food providers of family) • People below the poverty line (daily income less than People below the poverty line (daily income less than

USD $2) USD $2) • Generally recipients own no property Generally recipients own no property • Often seasonal or no regular income source Often seasonal or no regular income source • Displaced persons (e.g. from flood relocation, rural to Displaced persons (e.g. from flood relocation, rural to

urban migration due to civil conflict urban migration due to civil conflict

Why Microcredit?Why Microcredit?• Advancement of entrepreneurship and Advancement of entrepreneurship and

self-employment, thus creating cash self-employment, thus creating cash flow flow

• Supports individuals and families to Supports individuals and families to climb out of poverty cycle. climb out of poverty cycle.

• Enhancement of self-esteem and Enhancement of self-esteem and supports creativity supports creativity

• Encourages participation and initiation Encourages participation and initiation in solutions in local community in solutions in local community

• Increase of education options for both Increase of education options for both adults and children adults and children

Basic Micro Credit ModelBasic Micro Credit Model• MC Client takes loan of USD 80 MC Client takes loan of USD 80 to buy two to buy two

goats. Fortnightly payments (incl. interest) of USD goats. Fortnightly payments (incl. interest) of USD 3.50. Completed repayment within one year. Goats 3.50. Completed repayment within one year. Goats give birth during year, give birth during year, yearly income yearly income from sale of from sale of USD 80 plus goats as assetUSD 80 plus goats as asset. Thus now has . Thus now has capital and future income production. capital and future income production. Plus self-Plus self-confidence!confidence!  

• MC Client takes loan of USD 150 MC Client takes loan of USD 150 to set up small to set up small roadside shop. Fortnightly payments (incl. interest) roadside shop. Fortnightly payments (incl. interest) of USD 6.50. Completed repayment within one year. of USD 6.50. Completed repayment within one year. Shop produces weekly income of USD 16.50. At Shop produces weekly income of USD 16.50. At year end year end net profit net profit approximately approximately USD 400USD 400, plus , plus shop & stock on hand. Thus now has capital and shop & stock on hand. Thus now has capital and income production, and, income production, and, increased self-esteemincreased self-esteem

ResourcesResources• http://portal.unesco.org/en/files/44425/http://portal.unesco.org/en/files/44425/

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• http://www.omnuscco.com/Micro-Credithttp://www.omnuscco.com/Micro-Credit.ppt.ppt

• www.acronymfinder.comwww.acronymfinder.com