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July 29, 2015

Microfinance and Human Rights: a possible coexistence?

This study aims at demonstrating the importance of considering human rights principles as the baseline for microfinance actions, giving also a glance at impact assessment tools especially designed to measure human rights compliance.

Abstract written by Giuseppe Amatulli, author of the research paper "Microfinance and Human Rights: a possible coexistence?".

In order to be fulfilled, human rights need continuous protection and promotion. If in the past the promotion of such rights was a prerogative of State actors, in the last decades the situation has changed and also non-state actors have been included in the list of actors which must promote human rights. This is true also for MFIs, given that they play a fundamental role in helping people to improve their living conditions and hence, they can have an important
impact in the achievement of the full realisation of human rights.

However, linking human rights with MFIs is not easy, because people working in the MFIs sector often see their work linked only with development goals, but not with the achievement of human rights. This is a faulty belief given that since the establishment of development policies (after the Second World War) it was underlined their interrelation with human rights. Furthermore, all the aims included into the Millennium Development Goals list are strictly related with human rights; hence, achieving development goals also mean achieving human rights.

This work is structured in three different parts: in the first one, there is a general overview on the actions undertaken by MFIs in order to improve people’s life. The purpose of this part is to make aware the reader about the MFIs, their projects and who benefits from MFIs interventions. In the second part, an analysis on the possibility of having credit as human right, with an explanation of its positive and negative effects has been carried out. Finally, in the third part, an analysis of Human Rights Impact Assessment (HRIA), underlining the necessity of having it in the development sector, has been done.

In particular, a HRIA could be a useful tool in order to carry out a positive screening of the companies/projects in which impact investors could invest in, in order to decide in which one to invest in and which social goal could be fostered through the investment. It can also be used as a monitoring and evaluation tool for the companies or for projects that are recipients of impact investments. In this sense it should be taken into account that impact investing is a step towards a more responsible financial system, which should be based on ensuring that companies in which the investment are made take into consideration human rights principles in their actions.

The final goal of this study is to demonstrate that MFIs should include human rights in their working agenda in order to promote a kind of development that goes further the mere economic development, taking into account also a social advancement. Only in this way MFIs can have a fundamental role in helping people to improve their life, being recognised as important actors different from traditional banks and with long-term sustainable aims.

Photo credit: Jordan Lewin

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